Plamen Nikolov, Alan Adelman

Aging populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects, as adult children who make income contributions to their parents could adjust their behavior in response to changes in their parents’ income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of adult children to transfer income to elderly parents in the context of a large middle-income country, and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both middle- and high-income countries. 

Publication Type
Working Paper
File Description
First version, August, 2019
JEL Codes
D64: Altruism; Philanthropy
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration
O16: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
J14: Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
J22: Time Allocation and Labor Supply
H55: Social Security and Public Pensions
R20: Urban, Rural, Regional, Real Estate, and Transportation Economics: Household Analysis: General
life cycle
inter vivos transfers
middle-income countries
developing countries
crowd-out effect