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[IWS] ADB: BENEFIT INCIDENCE OF PUBLIC TRANSFERS: EVIDENCE FROM THE PEOPLE'S REPUBLIC OF CHINA [4 November 2014]
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Asian Development Bank (ADB)
ADB economics working paper series No. 413
BENEFIT INCIDENCE OF PUBLIC TRANSFERS: EVIDENCE FROM THE PEOPLE'S REPUBLIC OF CHINA [4 November 2014]
by Ke Shen and Sang-Hyop Lee
[full-text, 36 pages]
Three decades of virtually uninterrupted hyper economic growth have propelled the People’s Republic of China into the ranks of middle-income countries. However, this period of expansion in the economy has been accompanied by an equally rapid increase in levels of inequality in society.
Employing the National Transfer Account framework, this paper analyzes the benefit incidence of public transfers across the country’s generations and socioeconomic groups in 2009. Public transfers as a whole in the People’s Republic of China (PRC) are unevenly distributed across generations, with spending on the elderly twice as much as that on the young. Public education spending is equally distributed at the primary and secondary levels but favors urban residents, females, and higher income groups at the tertiary level. Disparities in public spending on health care are much greater at older ages. Public pension is highly regressive, with rural residents, women, and lower income groups receiving much lower pension benefits.
In the next 10 or 20 years, the government should endeavor to improve and strengthen public support systems. In addition to increasing government investments, the currently fragmented health insurance system and pension system should move toward a unified system to reduce inequalities in benefit incidence across socioeconomic groups. In the past decade, the PRC government has been dedicated to targeting the poor with programs that extend public health insurance and pensions to the rural population, but regional and socioeconomic disparities are still evident.
At present, the elderly living in rural areas and those in low-income groups rely heavily on transfers from their children to cover living expenses and medical care. With declining fertility and frequent migration, the large, strong family network weakens or even collapses. If the disadvantaged elderly are not well targeted by government programs, the level of inequality will be greater.
Benefit Incidence of Public Spending by Residence
Benefit Incidence of Public Spending by Gender
Benefit Incidence of Public Spending by Per Capita Household Income
Benefit Incidence of Total Public Transfers
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