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How to Enjoy Equal Old Age? Pension and Urban-rural Income Gap of the Elders

HUANG Zongye, ZHAO Jingjing

Abstract:

The unbalanced development between urban and rural areas has been a key challenge for both of the Party Central Committee and academic researchers. Recently, the income of the elders in China has been rising along with economic development, however, the urban-rural income gap of the elders is widening. At the same time, the Chinese population is aging rapidly, the share of elders continue to rise. Since the elders are significantly different from the young and middle-aged in many aspects, the urban-rural income gap of the elders should be studied separately. This paper focuses on the urban-rural income gap of the elders, and mainly discusses from two aspects. One is analyzing the impact of pensions on the urban-rural income gap of the elders, and the other one is evaluating the policy choices for adjusting the urban-rural income gap of the elders. This paper analyzes urban-rural income gap of the elders by using the 2017 data of China Household Finance Survey (CHFS). Using the Oaxaca-Blinder decomposition method and the RIF decomposition method, the interpretation of various factors on the elder’s urban-rural income gap is explored from multiple quantiles of residents’ income. The paper finds that comparing with working age people, the elders are facing a more severe urban-rural gap issue, and as their age increases, the urban-rural income gap has gradually widened; the difference in pension insurance is an important factor leading to the urban-rural gap in the income of the elders, explaining 96.7% of the urban-rural income gap of the elders, and its contribution gradually decreases with the rise of income quintiles. The article proposes and quantitatively examines three reform plans and found that increasing the coverage of public pension and forming a unified urban-rural resident pension system are beneficial to reduce the urban-rural income gap of elders, and it has important applications in promoting the balanced development of urban and rural areas and achieving the great goal of common prosperity.

Keywords: elder population; urban-rural income gap; Oaxaca-Blinder decomposition; RIF decomposition

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