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The Impact of Fiscal Subsidies on the Sustainability of China’s Rural Pension Program

by 1,* and 2
1
School of Economics, Fujian Agriculture and Forestry University, Fuzhou 350002, China
2
Department of Agricultural Economics, Texas A&M University, College Station, TX 77843, USA
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(1), 186; https://doi.org/10.3390/su12010186
Received: 13 November 2019 / Revised: 19 December 2019 / Accepted: 24 December 2019 / Published: 25 December 2019
(This article belongs to the Section Economic and Business Aspects of Sustainability)
This paper studies the impact of fiscal subsidies on the sustainability of China’s rural pension system. We first provide an overview of China’s rural pension system, and explain the formulas used to calculate the pension payments. We then examine how fiscal subsidies, in the forms of basic pensions, incentive pensions, and matching subsidies, affect participation rates and individual contributions. Our study shows that the rural residents’ participation rates can be improved significantly by increasing basic pensions or by providing incentive pensions, but not by providing matching subsidies. However, none of these fiscal subsidies have significant effects on the amount of individual contributions. Overall, our results imply that the incentive pension is an effective mechanism in encouraging rural residents to participate in pension programs, but the current level of matching subsidies is not sufficient to improve participation or increase contributions. Our study suggests the needs to increase the fiscal subsides used in China’s rural pension system, and can provide useful implications in designing the effective pension system for rural residents. View Full-Text
Keywords: Chinese Pension System; New Rural Pension Scheme (NPRS); Fiscal Subsidies; Incentive Pension; Matching Subsidy Chinese Pension System; New Rural Pension Scheme (NPRS); Fiscal Subsidies; Incentive Pension; Matching Subsidy
MDPI and ACS Style

Lin, B.; Zhang, Y.Y. The Impact of Fiscal Subsidies on the Sustainability of China’s Rural Pension Program. Sustainability 2020, 12, 186.

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