1 nta country report china’s case ling li china center for economic research at peking university...

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NTA country report

China’s Case

Ling Li

China Center for Economic Research at Peking UniversityBeijing, China

2007-01

2

China Center for Economic Research

Contents

Country background Economic and population growth Private transfer system Public transfer system poverty alleviation program

Progress Made on NTA Account Work progress Data Source Short description on unique methodology NTA Estimation Results Future plan

3


Country background

Per capita GDP and Growth Rate, China, (1978-2005)

0

2000

4000

6000

8000

10000

12000

14000

16000

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

0

2

4

6

8

10

12

14

16

18

per capita GDP(Yuan,current price) GDP growth rate(%)

4


Country background

Shift from “high birth rate, high mortality” to “low birth rate and low mortality ”

Demographic Characters of Chinese Population(‰)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

1952 1957 1962 1965 1970 1975 1980 1985 1990 1995 2000 2004

Birth Rate

Mortality

Growth rate

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Country background

Private transfer system to the elderly No developed social security system especially in rural areas The majority of elderly Chinese lives in the same household with their

offspring

Living Arragement of the elderly

0%

20%

40%

60%

80%

100%

2002rural 2002urban 2005rural 2005urban

with others

in a nursing house

alone

with spouse only

with offspring

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Country background

Private transfer system to the elderly intra-household transfer is the main channel of supporting the elderly 11.3% of the elderly in the rural area aged 65 and above still make living by

themselves 26.3% of rural elderly and 18.2% of urban elderly do not get adequate financial

support to cover their living cost

Table 2 Main source of financial support of the elderly, 2002

urban rural Total

pension 37.8% 5.5% 19.9%

spouse 2.4% 1.9% 2.1%

child(ren) 43.8% 69.0% 57.8%

grandchild(ren) 3.9% 6.0% 5.0%

other relative(s) 0.4% 0.7% 0.6%

local government or community 5.8% 4.2% 4.9%

work by self 3.9% 11.3% 8.0%

others 2.1% 1.3% 1.7%

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Country Background

Pensions Urban: basic old-age insurance system for the enterprises employees

Enterprise employees who have reached retirement age and who have paid their share of the premiums for 15 years or more shall be entitled to collect a basic old-age pension every month after retirement

Two parts: base pension and personal account Coverage: 155.06 million, 116.46 million of whom were employees (2003) Raising Funds:

Premium payment by both enterprises and employees Government subsidy National social security fund

Rural: old-age security in rural areas is centered mostly on families In 2004, the Chinese Government began to experiment with a system that supports

and rewards households that practice family planning by having only one child or two girls in some of the rural areas. Each person of such couple may receive a minimum of 600 Yuan a year from the age of 60 till the end of his or her life.

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Country Background

Health care Delivery System

Over 90% healthcare resources are owned by public hospitals 3-tire healthcare service network

Financing Government subsidy accounted for less than 10% of hospital income Price and healthcare expenditure grew rapidly (12 times from 1990 to 2005) The poorer get the less service

20

25

30

35

40

45

1993 1998

income quintiles

inp

ati

en

t a

dm

issi

on

ra

tep

er

10

00

ru

ral

Ch

ina

poorest quintile

2nd poorestmiddle quintile2nd richest

richest quintile

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Country Background

Health care Low insurance coverage Of all the healthcare expenditure, individual out-of-pocket expenditure account for as much

as 60% Basic Medical Insurance System for the Urban Employees

Rural: New Collective Medical Insurance: the reimbursement rate is low

Healthcare Insurance Coverage

Total Urban Rural

2003 1998 2003 1998 2003 1998

Basic insurance 8.9 - 30.4 - 1.5 -

Public insurance 1.2 4.9 4 16 0.2 1.2

Labor insurance 1.3 6.2 4.6 22.9 0.1 0.5

Cooperative Insurance 8.8 5.6 6.6 2.7 9.5 6.6

Other social insurance 1.4 5 2.2 10.9 1.2 3

Private Insurance 7.6 1.9 5.6 3.3 8.3 1.4

Out-of-pocket 70.3 76.4 44.8 44.1 79 87.3

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Country Background

Education compulsory education (9 years) and voluntary education the government expenditure accounts for the majority of education

expenditure.

Enrollment rates of variety levels of schools

41.4

99.15 95

52.7

21

0

10

20

30

40

50

60

70

80

90

100

Kindergarten Elementaryschool

Junior highschool

Senior highschool

University

Component of education expenditure

0

100000

200000

300000

400000

500000

600000

700000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

milli

on y

uan

Gov. EE Social Organizations and Private EE

Donations & Fund-raising Tuition & Miscellaneous Fee

Other

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Country Background

Education Challenge

Growing regional gap and gap between the rural and urban Deficiencies in Education for Women Unmet Education Needs of Migrant Children

Education Expenditure per Pupil, 1999

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

Shanghai Beijing Yunnan Hubei Shaanxi Guizhou

U.S

. Do

llars

primary

juniorsecondary

seniorsecondary

12


Country Background

Unemployment Insurance All enterprises and institutions in urban areas and their employees must

participate in the unemployment insurance program employers pay 2% of their total wage bill and individuals pay 1% of their

personal wages as unemployment insurance premiums.

Guarantee of the Minimum Standard of Living for Urban Residents

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Country Background

poverty alleviation programs According to China’s national poverty line, rural poverty population has

dropped from 250 million in 1978 to 28.2 million in 2002, decreasing by 88.7%

why China can decrease poverty population by a large margin high economic growth rural labor force transfers to non-agricultural industries Human capital has been obviously improved. Anti-poverty actions adopted by the government

Government Policies for the Aid-the-Poor Program Defining the Key Poverty-stricken Counties to Be Aided by the State Putting the Stress on the Poverty-stricken Areas in the Central and

Western Regions Financial support Aiding the Poor with Technology and Education Cooperation of the Eastern and Western Regions in the Aid-the- Poor

Work (对口支援） Encouraging Migration

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Progress Made on NTA Account

Work progress New private data source: Chinese Household Income Project (CHIP)

data , 1995 The sample size of CHIP95 (over 50,000 individuals) is much bigger than

our previous data (no more than 5000 individuals) We are in the progress of negotiating with the Academy of Chinese Social

Science to get the CHIP2002

Public data source Statistical yearbook Population census data Some specific yearbooks

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Progress Made on NTA Account

Short description on unique methodology Separately estimation between urban and rural area

most of the micro data in China is collected and reported separately big gap between the rural and urban China For the private accounts, people may have different behaviors For the public accounts, most government expenditures (public resources)

are allocated in the urban areas

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NTA Estimation Results

Private consumption

Private consumption, urban, 1995

private consumption,per capita,urban

0

1000

2000

3000

4000

5000

0 7 14 21 28 35 42 49 56 63 70 77 84

Education Health Other

Private consumption, per capita, rural, 1995

private consumption,per capita, rural

0

500

1000

1500

2000

2500

0 8

16 24 32 40 48 56 64 72 80 88

Education Health Other

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Private consumption ： discussion Healthcare expenditure

regression method may lead to bias Big gap between the urban and rural The elderly (over 50 years old) consumes less than other countries

Age-health profile by different methods, urban

Age-health profile by different methods

-100

0

100

200

300

400

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90

Indivudual data Regression

Private Healthcare expenditure,per capita

0

50

100

150

200

250

300

350

400

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89

urban self report rural National

Private Healthcare Expenditure, per capita, 1995

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Private consumption ： discussion Healthcare expenditure

Why the elderly consumes less? the household choose to allocate more resource to the mid-ages rather than the

elderly when they get sick The elasticity of the healthcare expenditure for the mid-ages (25-50) to the

household income is 0.35, while the old-ages (50 and above) is 0.25

Two-week healthcare expenditure of different age groups, 1997

Two-week healthcare expenditure by age,1997

0

2040

6080

100

120140

160

0-4 .5-14 15-24 25-34 35-44 45-54 55-64 65-+

Age

Yua

n

Total Urban Rural

Source: 2nd National Healthcare Service Survey

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Public consumption Allocating different public

expenditures according to different rules

Problem: How to allocate public

expenditures between the urban and rural

Public Expenditure, Urban, Per capita, 1995

Public expenditure,urban,per capita (RMB yuan)

0

200

400

600

800

1000

1200

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Education

Health

Other

Public Expenditure, Rural, Per capita, 1995

Public expenditure,rural,per capita (RMB yuan)

0

100

200

300

400

500

600

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Other Health Education

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Labor income the gap of labor income

contributes much to the income diversity between urban and rural.

The age-labor income curve of the rural is much “fatter” than the urban

Labor incomes, urban, per capita, 1995

labor income, urban, per capita

0

1000

2000

3000

4000

5000

6000

7000

8000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Labor income, rural, per capita, 1995

Labor income,rural,per capita

0

500

1000

1500

2000

2500

3000

3500

4000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Wage income

self-employed income

Total labor income

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Labor income: discussion Migration’s impact on

labor income in the rural

Wage income,rural,per capita

0

100

200

300

400

500

600

700

800

900

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Wage income

Working time out of hometown (Month)

0

0.5

1

1.5

2

2.5

3

3.5

4

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Average Working Time out of Hometown, 1995

Wage income, rural, per capita, 1995

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Labor income: discussion Ronald Lee (2004)

Brazil type France type Japan type

the China age-labor income profile in the urban follows the mixture of type I and type II, while the rural one follows type II

whether they have the same mechanism is an interesting topic to be discussed.

Share of aggregate earnings for youth (20 and under) and elderly (65 and over)

0 2 4 6 8 10

Brazil(1996)

France(1995)

Indonesia(1996)

Taiwan(1998)

Thailand(1990)

US(2001)

Australia(2000)

Japan(1999)

China,urban(1995)

China,rural(1995)

China,national(1995)age 65+

age 20-

Share of aggregate earrings from youth (20- ) and elderly (65+), 1995

jiangyu

Ronald Lee (2004) discusses the shape of labor income, the shapes fall into one of three types: (1) Brazil type, where the young account for a substantial portion of aggregate earnings, peaking in the early 30s and dropping sharply after that. (2) France type, where the young and the elderly accounts for a small share of aggregate earnings, with peaking in the early or mid 40s. (3) Japan type, where people aged 60 and above account foe substantial portion of aggregate earnings. The share of young workers is much less than any other countries.

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Life-cycle Deficit Note

Underestimation of the labor income

Incomplete aggregate data

Labor income includes only earning

2/3 agriculture income is considered as labor income, I think that the ratio is lower, as the agriculture production is labor-intensive.

Over-estimation of public consumption

Public investment is includes

LCD,per capita,rural

0

500

1000

1500

2000

2500

3000

3500

4000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

Consumption

Labor income

LCD, per capita, rural, 1995

LCD, per capita, urban, 1995

LCD,urban,per capita

0

1000

2000

3000

4000

5000

6000

7000

8000

0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88

consumption

Labor income

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Future plan

Complete the estimation using CHIP95 data and make full estimation with CHIP2002 data after we get it

Construct methodology to separate government expenditure to the urban and rural

Estimate and discuss the difference and transfers across the urban and rural Investigate the reason why Chinese elderly consumes relatively less

healthcare expenditure. The National Aging Population Survey data is full of health indexes, which may help us a lot.

Discuss the role of migration in terms of the NTA Account.

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Thanks

1 nta country report china’s case ling li china center for economic research at peking university...

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