The health implications of social pensions: Evidence from China's new rural pension scheme

This paper estimates the causal effect of income on health outcomes of the elderly and investigates underlying mechanisms by exploiting an income change induced by the launch of China's New Rural Pension scheme (NRPS). Using this policy experiment, we address the endogeneity of pension income by applying a fixed-effect model with instrumental variable correction. The results reveal that pension enrollment and income from the NRPS both have had a significant beneficial impact on objective measures of physical health and cognitive function of the rural elderly. Pension recipients respond to the newly acquired pension income in multiple ways: improved nutrition intake, better accessibility to health care, increased informal care, increased leisure activities, and better self-perceived relative economic situation. These in turn act as channels from pension income to health outcomes of the Chinese rural elderly. Institute for Advanced Research, Shanghai University of Finance and Economics, China; China Economics and Management Academy, Central University of Finance and Economics, China; School of Business, Nanjing University, China; School of Labor and Human Resources, Renmin University of China, China. (C) 2016 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.