Does a Universal Pension Reduce Elderly Poverty in China?

This paper studies the impact of the universal pension programme on elderly poverty in both rural and urban China. Using the three rounds of panel data based on the Health and Retirement Longitudinal Study (CHARLS) in 2011-2015, we examine whether the universal pension programme reduced elderly poverty, comprehensively defined to cover both unidimensional and multidimensional poverty indices of the households and individuals. To utilise the longitudinal nature of the data, we apply the robust Fixed-Effects (FE) Model with Propensity Score Matching (PSM) and the FE Quantile Model with PSM taking into account the unobservable individual characteristics, such as entrepreneurship or risk preference. Our results show that the universal pension programme reduced poverty in monetary and non-monetary terms in both rural and urban areas. While rural people tend to continue to work in the labour market after the receipt of the pension, urban people work less due to the negative income effect of the programme. The panel quantile regression results suggest that the programme decreased the inequality in both monetary and non-monetary dimensions. Our results provide strong evidence to underscore the success of the Chinese universal pension programme in reducing poverty and inequality in both rural and urban areas