Old Age Allowance and Intergenerational Transfers

I estimate the effect of public transfers to the oldest old on intergenerational transfers within families. Using the 2013, 2015, 2018, and 2020 waves of the China Health and Retirement Longitudinal Study (CHARLS), I study China's Old Age Allowance (OAA), an unconditional cash transfer program targeted at the oldest old. OAA benefits are modest, generally ranging from 80 to 800 CNY per month, and account for only 2.3 percent of total elderly income in our sample. I compare elderly respondents just below and just above the effective age 80.5 cutoff and use the cutoff as an instrument for OAA receipt in a fuzzy regression discontinuity (RD) design. I find that eligibility increases the OAA take-up rate by 17.6 percentage points, but the corresponding effects on intergenerational transfers are insignificant. This pattern holds for transfers from children to parents and from parents to children, for both transfer occurrence and transfer amounts, and across health states. Our results suggest that OAA operates mainly as a supplementary source of elderly income rather than as a program that reshapes intergenerational transfers within the family.