Crowding in or Out？National Public Pension, Inter-Generational Contract, and Family Support to Empty-Nest Older Parents in Rural China

ABSTRACT

Evidence to date has been inconclusive on the effects of public pension on family support to older adults, and the underlying mechanism behind such effects remains unclear. This study examines the effects of the New Rural Social Pension Scheme on family support to empty-nest older parents in rural China, where family care is traditionally favored for older adults. Using data from the China Longitudinal Aging Social Survey, the findings reveal that pension receipt promotes bidirectional financial transfers and intimate relationships between generations, thus increasing (or crowding in) children’s financial and care support to their empty-nest parents. On the other hand, receiving pensions may discourage parental care support to children and partially decrease (or crowd out) children’s financial and care support. This crowding-out effect, however, is limited and thus insufficient for counteracting the crowding-in effects from other pathways. Overall, these findings indicate that national welfare, such as pensions, can encourage family support through inter-generational contracts and intimacy, strengthening familial bonds and facilitating mutual assistance within families. For policy implications, government should prioritize improving benefit levels of public pensions to harness the caregiving potential of families and providing essential services that assist families in addressing care burdens.

KEYWORDS:

• Empty-nest older parents
• family support
• inter-generational contract
• national welfare
• new rural social pension insurance

Introduction

The allocation of responsibility between the family and the state in caring for older people is widely discussed in all societies. In response to the crisis of the traditional welfare state in the 1970s, welfare pluralism and mixed welfare systems gained popularity in welfare states, which aimed to make more planned use of non-state resources, such as family care, to guarantee well-being and curb public welfare costs (Evers, 1995). However, the transfer of old-age care responsibilities from government to families has generated extensive debate regarding the appropriate division of these responsibilities (Moroney, 1979). These debates have yet to reach a consensus as researchers found private and public transfers can complement, displace or even reinforce each other. Some empirical evidence reveals the complementarity between private and public transfers, with public welfare stimulating family care for older people by sharing the burden of family members (Reil-Held, 2006). Conversely, other studies suggest public transfers can lead to a reduction in private transfers from family members, thereby diluting the effectiveness of any program (Jensen, 2003).

In rural China, where the traditional norm has placed the responsibility of caring for older parents on adult children, the increasing involvement of the government in caring older adults has stimulated a similar debate on the relationship between public transfer and family support. In response to the market-oriented economic reforms of the 1980s, China has established a multi-tiered social security system that allocates welfare responsibilities among the state, enterprises, and families (Leung, 2003). The Law on the Protection of the Rights and Interests of Elderly People were issued to specify children’s filial obligation, while various policies were implemented to alleviate family’s care burden (Feng, 2017). Notably, the New Rural Social Pension Insurance (NRSPI), a public pension scheme for Chinese rural residents, stands as one of the most significant welfare programs in this context.

The NRSPI has provided tangible benefits to rural older adults and reduces their dependence on children’s support, particularly for empty-nest parents who face challenges receiving family care. As for to what extent the NRSPI could provide support for family care in rural China, some studies reveal the public transfers from public pension scheme could displace children’s financial and care support in the family, which is called “crowding-out effects” (X. Chen et al., 2018; Fan, 2010). While other scholars have the opposite opinion that the receipt of public pensions can increase the probability of receiving financial and care support from children which is called “crowding-in effect” (T. Chen et al., 2017; Ning et al., 2018). However, there is no consensus on this discussion and the underlying mechanism by which the public pension affects family support remains unclear.

In this study, we explore the impacts of China’s rural public pension on family support for empty-nest older parents, and the underlying mechanism behind this impact. From the perspectives of inter-generational contract and intimacy, our research examines how the NRSPI could affect family support through inter-generational exchange and intimate relationship within families, and how these perspectives could explain the crowding-in or crowding-out effects of public pension. By doing so, we hope to offer deeper insights into the relationship between public pension and family support. Also, we try to facilitate scholarly debate regarding the relationship between national welfare and family care, as well as the discussion on the division of care responsibilities between the state and the family.

Pension reform in rural China and new rural social pension insurance

In the past recent years, China has undergone a significant pension reform that has resulted in the state assuming greater responsibilities for old-age care within families. In rural areas, where traditional Confucian filial norms have long prevailed, the responsibility of caring for older people has primarily rested on families. However, the market-oriented reforms of the 1980s led to the breakdown of the traditional work unit-based social security system and the establishment of a multi-layered pension system (T. Liu & Sun, 2016). Nevertheless, the pension program for rural residents is a latecomer in this reform. It was not until 2009 that a new pension plan called the “New Rural Social Pension Insurance” (NRSPI) was introduced for rural residents. The funding for the NRSPI comes from participants’ contributions, land collective subsidies from local village communities, and public subsidies from local and central governments. Each participant has a lifelong personal account that records individual premiums and other subsidies (Williamson et al., 2017). To be eligible for monthly pension benefits, participants must be at least 60 years old and have contributed for a minimum of 15 years (C. L. Liu & Han, 2010). In 2012, the merger of NRSPI and Urban Residents’ Social Pension Insurance gave rise to the Residents’ Social Pension Insurance (RSPI). RSPI aims to offer public pensions to residents who are not covered by the Employees’ Social Pension Insurance (ESPI). According to the Chinese government’s Outline of the 14th Five-Year Plan, the combined coverage rate for RSPI and ESPI reached 90% by the end of 2020. However, the coverage rate in rural regions is lower due to economic constraints and policy implementation. Although merged into RSPI, we continue to utilize the term “NRSPI” in this manuscript due to its widespread usage among rural residents and local communities.

The effects of China’s public pensions on family support for rural older parents

Despite the ambitious expansion of the NRSPI, the monthly pension benefits remain insufficient to cover the daily expenses of rural older adults (T. Liu & Sun, 2016). However, despite this criticism, NRSPI has had a significant impact on family support for rural older adults. Evidence from rural China suggests that the receipt of public pension can partially discourage (or crowd out) children’s financial transfers to their parents and significantly reduce inter-generational co-residence (X. Chen et al., 2018). However, the inter-generational financial transfers are not completely displaced, as adult children continue to provide support to their older parents due to the limited public pension benefits (Fan, 2010; H. Zhang & Sun, 2011). These findings align with studies conducted in other developing countries such as Peru and South Africa, which suggest that family support and the welfare state can serve as substitutes for one another (Jensen, 2003; Reil-Held, 2006b). The theoretical explanation for the occurrence of crowding-out effects can be attributed to the modernization, which states a strong welfare state supplants family obligations, erodes inter-generational solidarity and diminishes the willingness of mutual assistance in families (Künemund & Rein, 1999).

However, some scholars hold the opposite opinion that rural public pension can promote (or crowd in) family support for Chinese older parents. Research indicates that pension payments significantly increase the likelihood of receiving gross transfers and probability of the net transfer from adult children (T. Chen et al., 2017; Ning et al., 2018). Additionally, other studies find a crowding-in effect on children’s care support, as public pensions have the potential to promote inter-generational assistance within rural families (J. Chen, 2020). These empirical evidence from rural China consists with studies conducted in developed countries, which demonstrate that generous welfare systems can strengthen family solidarity, significantly increasing adult children’s filial responsibility and likelihood of supporting their older parents (Brandt et al., 2009; Künemund & Rein, 1999). In summary, previous studies have adopted a policy evaluation paradigm. Although some studies have attempted to explain the reasons behind the crowding-in and crowding-out effects, their explanations are largely theoretical and don’t have sufficient empirical evidence. Besides, the impact of public pension on the empty-nest parents in rural China has been rarely explored, despite the fact that these older parents face greater challenges on family support, making public pension particularly significant in addressing their care needs in later life.

Theoretical approaches through which public pensions can affect family support

To explore the mechanism through which public pension can impact family support for Chinese rural empty-nest parents, several crucial questions must be addressed. Firstly, what approaches can influence family support for rural older parents? Secondly, among these approaches, which ones can be influenced by the receipt of public pensions by parents? Previous research indicates that parents’ health status, the number of children, their living arrangement with children and their children’s individual characteristics can influence the family support provided by children (Lei, 2013; C. Zhang, 2015). In Chinese society, Confucian filial piety, which emphasize children’s responsibility of caring older parents, are vital factors of family care (Davis & Harrell, 1993). However, limited evidence reveals these individual characteristics, and children’s perceptions of filial piety may be affected by receiving pensions. Therefore, they can’t be considered as explanatory pathways in our study.

While previous research attributes the crowding-in or crowding-out effects to family members’ altruistic motives and inter-generational solidarity, the mechanisms by which pension schemes stimulate these motives, and how they facilitate adjustments in children’s care strategies, remain unclear. Therefore, it is crucial to establish a micro-level framework that can explain inter-generational interactions among family care comprehensively. Through a thorough review of the literature, two explanatory approaches emerge: family intimacy and inter-generational contracts. These approaches are not contradictory to the explanations of altruism and inter-generational solidarity. Family intimacy serves as the primary driving force behind inter-generational solidarity, and the resources exchanges within inter-generational contracts manifest as forms of solidarity and reciprocal behaviors among family members.

The approach of inter-generational contract highlights the binding nature of inter-generational exchange in the Chinese family. This contract posits that adult children and their parents engage in contemporaneous and dynamic support exchange throughout their life course (Davis & Harrell, 1993). Although constrained by filial norms, changing family ethics have given rise to inter-generational exchanges in Chinese families. Studies have confirmed that parental investments in children, both financially and instrumentally, have a positive impact on children’s financial and care support (Cong & Silverstein, 2012). According to this contract, the receipt of pensions may prompt parents to adjust the allocation of financial and care resources toward their adult children. Nevertheless, the reaction of rural empty-nest parents to their pension receipt could remain uncertain. The geographical separation may pose challenges to sustaining the contract, potentially prompting older parents to pursue greater independence and reduce their investment. Consequently, there may be a decrease in the financial and care support from adult children, aligning with the principle of equity in resource exchange. However, the limited pension subsidy may necessitate parents to continue reliance on the inter-generational contract. As the financial status improves, they may allocate additional resources, particularly in the form of monetary transfers to their children, thereby strengthening children’s commitment to the contract and encouraging them to provide greater support in return. Based on this rationale, we propose Hypothesis 1: Pensions from the NRSPI can affect family support for rural empty-nest parents through the inter-generational contract, with parental financial and care support to adult children serving as mediators.

Furthermore, the approach of intimacy also offers insights into the underlying mechanisms. Intimacy refers to a new kind of mutual knowing, understanding, and emotional sharing across generational lines, it can be reflected through intensive communications, verbal expressions, and bodily displays of emotional attachment among family members (Yan, 2016). Intimacy plays a crucial role in fostering family support for older parents, as closer parent-child relationships facilitate increased inter-generational assistance (Anning, 2018). Additionally, research has demonstrated that public pensions contribute to the enhancement of intimate bonds within families, promoting the preservation of social networks and a notable improvement in the family relationships (X. Chen et al., 2018; Zhu & Walker, 2019). In fact, previous research has already indicated generous welfare can stimulate older parents to engage in greater intimacy, leading to increased gift-giving behavior toward their children and, in turn, encouraging children’s support to them (Künemund & Rein, 1999). However, empirical analysis regarding this explanation remains scarce. To address this research gap, we put Hypothesis 2: Pensions from NRSPI can stimulate children’s financial and care support for their rural empty-nest parents by strengthening intimate relationships within the family.

Methods

Sampling

This study employs data from the China Longitudinal Aging Social Survey (CLASS), which was launched in 2011 and collect data every two years and is a large-scale nationwide social survey project. Mainly conducted by the National Survey Research Center at Renmin University of China, CLASS aims to understand various problems that Chinese people face in the later life. Although NRSPI was introduced in 2009, the questionnaire designs and the coding rule for respondents’ identification numbers before the 2014 survey quite differed from those in the 2016 and 2018 surveys. Therefore, it’s more appropriate for us to select two phases of panel data from 2016 to 2018 for statistical analysis. The target respondents in our study, empty-nest older parents in rural China, should meet following requirements: 1) Over 60 years old, the mandatory age for receiving public pensions from NRSPI. 2) With household register and permanent residence in rural regions. 3) Living in a separated household from children (at least 15 minutes’ walk distance). Finally, 1170 respondents were selected in this study. To focus on examining resource exchanges between older parents and their children and recognizing that most respondents may have inter-generational exchange with more than one child, we transform the data structure from wide to long format. This involves changing the unit of analysis from older parents to adult children. Using the “reshape” command in STATA 16.0, we restructure the original parent-child dyad data into a child-parent dyad format. This allows us to create 2924 cases, representing the number of adult children in each year’s datasets, each encompassing both their personal information and their parents’ information.

Measurement

We first measure the dependent variable, children’s financial and care support to empty-nest parents. Participants were asked about their amount of financial transfer (DV1) to parents last year, with the value of 1 indicating 0–199 yuan, 2 indicating 200–499 yuan, 3 indicating 500–999 yuan, 4 indicating 1000–1999 yuan and 5 indicating more than 2000 yuan. And their frequency of care support (DV2) to older parents last year was also investigated, with the value of 1 indicating almost rarely, 2 indicating several times in a year, 3 indicating at least one time a month, and 4 indicating at least one time a week or almost every day.

Then we measure the explanatory variables, whether the older parents receiving public pension from the NRSPI or not (IV1). The value of 0 indicates the older parents didn’t receive pensions in the year surveyed, while the value of 1 indicates that they did. For the measurement of parents’ investment in children, older parents were inquired about their parental financial support to adult children last year (IV2) (1 = 0–199 yuan, 2 = 200–499 yuan, 3 = 500–999 yuan, 4 = 1000–1999 yuan, 5 = more than 2000 yuan). As for parental care support (IV3), older parents’ frequency of care support on children’s housework duties and grandparent care last year were investigated (1= almost rarely, 2 = several times in a year, 3 = at least one time a month and 4= at least one time a week or almost every day). Another mediator is family intimacy (IV4), which is described in the inter-generational relationship. The respondents were inquired about their subjective feelings of relationship with their children (1 = not close, 2 = moderately close and 3 = very close). The scores would represent the extent of parents’ intimate relationships with their children.

Besides, according to the existing studies on determinants of children’s family support, several variables are controlled. The control variables include children’s financial status, which was measured by parents’ perceptions of their children’s financial status (1 = in bad status, 2 = nearly to cover the daily expense and 3 = in good status), parents’ employment status (0 = unemployed, 1 = employed), parents’ marriage status (0= divorced or widowed, 1= married), parents’ health status (0 = bad heath, 1 = average health and 2 = good health), parents’ annual income (with logarithm), the number of their children, the number of family members they living with, and the distance from children’s family. Additionally, it is important to acknowledge that children may adapt their supportive strategies by considering their own resources and existing public assistance, which can result in potential interrelationship between financial (DV1) and care support (DV2) provided to their parents (Brandt et al., 2009). To address this issue, we consider two dependent variables as separate control variables for each other. In models where DV1 is the dependent variable, we have added DV2 as a control variable, and vice versa in models where DV2 is the dependent variable.

Data analysis

The data analyses have been carried out using Stata (version 16.0). To evaluate the association between parents’ receipt of pensions and children’s family support to them, we built a fixed-effects ordered logistic regression model. By controlling for individual and time fixed effects, the model can help mitigate the potential biases caused by unobserved heterogeneity and time-varying confounding factors, thereby enhancing the validity and reliability of the model results. Subsequently, we examine the mediating effects of parental financial and care support, as well as family intimacy, in each pair of relationships. To accomplish this, we employ Baron and Kenny’s (1986) four-step method and conducted three regression analyses to test each mediating effect.

Results

Descriptive statistics

Among the older parents, 59.32% report receiving pensions from NRSPI in 2016, which increases to 70.68% in 2018. Besides, 29.32% don’t receive pensions in either year. The respondents have an average age of 70.16 and an average of 2.6 children in 2018. Among the children, in both 2016 and 2018, over half of the respondents report providing their parents with more than 500 yuan per month, and more than 40% report providing care to their parents more than once a month. In terms of parental support for adult children, the majority of children report receiving less than 200 yuan from their older parents (78.56% in 2016, 77.09% in 2018), and approximately 70% of respondents report rarely receiving care support from older parents (68.33% in 2016, 68.37% in 2018). Furthermore, over 80% report having a good relationship with parents. Due to the length constraint of the manuscript, Table 1 only presents the aggregated description of two years’ panel data with 5848 cases.

Table 1. Aggregated description of two years’ panel data (N = 5848).

Variables	Mean	S.E.	Min	Max
Dependent Variables
Children’s financial support to parents (DV1)	2.902	1.355	1	5
Children’s care support to parents (DV2)	2.285	1.109	1	4
Independent Variables
Parents’ receipt of public pensions (IV1)	0.663	0.473	0	1
Parental financial support (IV2)	1.467	1.020	1	5
Parental care support (IV3)	1.605	1.014	1	4
Family intimacy (IV4)	2.802	0.451	1	3
Control variables
Children’s Gender	1.469	0.499	1	2
Distance from parents’ residence	2.467	0.921	1	4
Children’s financial status	3.137	0.618	1	5
Parents’ health status	3.313	0.933	1	5
Parents’ marriage status	0.778	0.416	0	1
Parents’ annual income (with logarithm)	8.024	1.501	0	12.766
Parents’ employment	0.272	0.445	0	1
Number of siblings	2.610	1.200	1	9
Parents’ co-resident family members	1.998	0.744	1	7

The mediating effects of parental financial support

Table 2 presents the results of the examination on the mediating effects of parental financial support (IV2). Models 1 to 3 examine the mediating effect of parental financial support (IV2) on the relationship between parents’ pension receipt (IV1) and their children’s financial transfers to them (DV1). Models 1 and 2 indicate a positive association between parents’ pension receipt and both children’s financial transfers (coef = 0.843, p < .001) and parental financial support (coef = 0.170, p < .05). Model 3 shows that when parental financial support is included in the regression model, it is positively associated with children’s financial transfers (coef = 0.407, p < .001). Additionally, parents’ pension receipt remains positively associated with their children’s financial transfers (coef = 0.752, p < .001), but the odds ratio decreases compared to Model 1. Therefore, the receipt of pension from NRSPI can crowd in children’s financial transfers to their empty-nest parents, and parental financial support to children acts as a mediator in this process. Models 4 to 6 examine the mediating effect of parental financial support (IV2) on the relationship between parents’ pension receipt (IV1) and their children’s care support to them (DV2). Models 4 and 5 indicate a positive association between parents’ pension receipt and both children’s care support (coef = 0.786, p < .001) and parental financial support (coef = 0.158, p < .05). However, in Model 6, when parental financial support is included, it does not show a significant association with children’s care support. Therefore, the receipt of pensions from NRSPI can also encourage children’s care support, while parental financial transfer does not mediate this relationship.

Table 2. Mediating effects of parental financial support.

	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6
	DV1 Children’s financial support	IV2 Parental financial support	DV1 Children’s financial support	DV2 Children’s care support	IV2 Parental financial support	DV2 Children’s care support
IV1 Pension receipt	0.843***(0.231)	0.170*(0.347)	0.752***(0.222)	0.786***(0.223)	0.158*(0.331)	0.778***(0.223)
IV2 Parental financial transfer			0.407***(0.082)			0.048 (0.092)
IV3 Parental care support	0.224***(0.081)	0.166* (0.115)	0.241***(0.084)	0.874***(0.107)	0.190* (0.104)	0.878***(0.108)
IV4 family intimacy	0.739***(0.162)	0.699**(0.295)	0.802***(0.162)	−0.263(0.190)	0.807**(0.276)	0.267* (0.190)
Children’s financial support				0.230***(0.054)	0.288***(0.083)	0.232***(0.054)
Children’s care support	0.299***(0.067)	0.102 (0.120)	0.297***(0.068)
Children’s gender	0.226 (0.210)	−0.051 (0.552)	0.225 (0.213)	0.167 (0.186)	1.459***(0.311)	0.178 (0.186)
Distance from parents’ residence	0.139** (0.058)	0.107 (0.118)	0.156***(0.057)	0.248 (0.240)	0.129 (0.565)	0.247 (0.242)
Children’s financial status	0.322** (0.152)	1.457***(0.315)	0.395***(0.153)	−0.340***(0.065)	0.092 (0.116)	−0.339***(0.065)
Parents’ age	0.658***(0.113)	0.518**(0.202)	0.610***(0.118)	0.174 (0.110)	0.419* (0.219)	0.180 (0.110)
Parents’ health	−0.148** (0.068)	−0.014 (0.156)	−0.169** (0.070)	−0.091 (0.075)	−0.112 (0.164)	−0.092 (0.075)
Parents’ marriage	−0.303 (0.552)	−1.393** (0.603)	0.134 (0.512)	−0.283 (0.433)	−0.769 (0.589)	−0.274 (0.430)
Parents’ income	−0.025 (0.049)	0.664***(0.105)	−0.066 (0.051)	0.014 (0.058)	0.636***(0.104)	0.021 (0.058)
Parents’ employment	−0.057 (0.121)	0.666** (0.277)	−0.081 (0.126)	−0.128 (0.147)	0.614** (0.275)	−0.120 (0.148)
Number of siblings	0.071 (0.118)	−0.787**(0.277)	0.108 (0.121)	−0.048 (0.110)	−0.784**(0.259)	−0.054 (0.110)
Parents’ co-resident family members	0.197** (0.083)	−0.304** (0.139)	0.237***(0.083)	0.127* (0.085)	−0.290** (0.139)	0.127* (0.085)
Time fixed effects	Control	Control	Control	Control	Control	Control
Individual fixed effects	Control	Control	Control	Control	Control	Control
Observations	3472	2246	3472	3480	2246	3480
R-squared	0.124	0.226	0.148	0.229	0.254	0.229

Significance levels: ***p < .001, **p < .01, *p < .05.

The suppressing effects of parental care support

Table 3 presents the results of the examination on the mediating effects of parental care support (IV3). Models 7 to 9 examine the mediating effect of parental care support (IV3) on the relationship between parents’ pension receipt (IV1) and their children’s financial transfers (DV1). Model 7 indicates a positive association between parents’ pension receipt and children’s financial transfers (coef = 0.706, p < .001), while Model 8 indicates a negative association between parents’ receipt of pensions and children’s care support coef = −0.866, p < .01). Model 9 shows that when parental care support is included in the regression model, it is positively associated with children’s financial transfers (coef = 0.241, p < .001). Furthermore, parents’ pension receipt remains positively associated with their children’s financial transfers (coef = 0.752, p < .001), but the odds ratio increases compared to Model 7. As a result, the receipt of pensions from NRSPI can crowd in children’s financial support to their empty-nest parents. However, parental care support to children act as a suppressor in this process. This implies that parents’ receipt of pensions can crowd out children’s financial support by decreasing parental care support, but this crowding-out effect is limited and cannot counteract the crowding-in effects from other explanatory pathways.

Table 3. Suppressing effects of parental care support.

	Model 7	Model 8	Model 9	Model 10	Model 11	Model 12
	DV1 Children’s financial support	IV3 Parental care support	DV1 Children’s financial support	DV2 Children’s care support	IV3 Parental care support	DV2 Children’s care support
IV1 Pension receipt	0.706***(0.228)	−0.866**(0.356)	0.752***(0.222)	0.738***(0.216)	−0.586* (0.321)	0.778***(0.223)
IV2 Parental financial transfer	0.397***(0.082)	0.158* (0.106)	0.407***(0.082)	0.017 (0.086)	0.223** (0.098)	0.048 (0.092)
IV3 Parental care support			0.241***(0.084)			0.878***(0.108)
IV4 family intimacy	0.759***(0.160)	0.267 (0.289)	0.802***(0.162)	0.089 (0.170)	0.062 (0.229)	0.267* (0.190)
Children’s financial support				0.177***(0.046)	0.127* (0.071)	0.232***(0.054)
Children’s care support	0.219***(0.059)	1.026***(0.119)	0.297***(0.068)
Other variables	Control	Control	Control	Control	Control	Control
Time fixed effects	Control	Control	Control	Control	Control	Control
Individual fixed effects	Control	Control	Control	Control	Control	Control
Observations	3472	2716	3472	3480	2716	3480
R-squared	0.138	0.155	0.148	0.263	0.150	0.229

Significance levels: ***p < .001, **p < .01, *p < .05. Note: The control variables are the same as those in Table 2; because of space limits, the regression results are not reported for the other control variables.

Models 10 to 12 examine the mediating effect of parental care support (IV3) on the relationship between parents’ pension receipt (IV1) and their children’s care support (DV2). Model 10 indicates a positive association between parents’ receipt of pensions and children’s care support (coef = 0.738, p < .001), while Model 11 indicates a negative association between parents’ pension receipt and children’s care support coef = −0.586, p < .05). Model 12 shows that when parental care support is included in the regression model, it is positively associated with children’s care support (coef = 0.878, p < .001). Additionally, parents’ pension receipt remains positively associated with their children’s financial transfers (coef = 0.778, p < .001), but the odds ratio increases compared to Model 10. In conclusion, the receipt of pensions from NRSPI can also crowd in children’s care support. However, parental care support has suppressing effects on this relationship, parents’ receipt of pensions can crowd out children’s care support by discouraging parents’ care support to their children.

The mediating effects of family intimacy

Table 4 presents the results of the examination on the mediating effects of family intimacy (IV4). Models 13 to 15 examine the mediating effect of family intimacy (IV4) on the relationship between parents’ pension receipt (IV1) and children’s financial transfers (DV1). Models 13 and 14 indicate a positive association between parents’ pension receipt and both children’s financial transfers (coef = 1.132, p < .001) and family intimacy (coef = 0.896, p < .01). Model 15 shows that when family intimacy is included in the regression model, it is positively associated with children’s financial support (coef = 0.802, p < .001). Additionally, parents’ pension receipt remains positively associated with their children’s financial transfers (coef = 0.752, p < .001). Therefore, family intimacy acts as a mediator on the relationship between parents’ pension receipt and children’s financial support. Models 16 to 18 examine the mediating effect of family intimacy (IV4) on the relationship between parents’ pension receipt (IV1) and children’s care support (DV2). Models 16 and 17 indicate a positive association between parents’ pension receipt and both children’s care support (coef = 0.839, p < .001) and family intimacy (coef = 0.660, p < .05). In Model 18, when family intimacy is included, it shows a significant association with children’s care support (coef = 0.267, p < .05), and parents’ pension receipt remains positively associated with their children’s care support (coef = 0.778, p < .001). Therefore, family intimacy also has mediating effects on the relationship between parental receipt of pension and children’s care support.

Table 4. Mediating effects of family intimacy.

	Model 13	Model 14	Model 15	Model 16	Model 17	Model 18
	DV1 Children’s financial support	IV4 family intimacy	DV1 Children’s financial support	DV2 Children’s care support	IV4 family intimacy	DV2 Children’s care support
IV1 Pension receipt	1.132***(0.222)	0.896** (0.350)	0.752***(0.222)	0.839***(0.224)	0.660* (0.363)	0.778***(0.223)
IV2 Parental financial transfer	0.379***(0.080)	0.058 (0.117)	0.407***(0.082)	0.056 (0.091)	0.194 (0.130)	0.048 (0.092)
IV3 Parental care support	0.216***(0.082)	0.053 (0.109)	0.241***(0.084)	0.860***(0.104)	0.054 (0.106)	0.878***(0.108)
IV4 family intimacy			0.802***(0.162)			0.267* (0.190)
Children’s financial support				0.219***(0.054)	0.458***(0.092)	0.232***(0.054)
Children’s care support	0.272***(0.067)	0.015 (0.010)	0.297***(0.068)
Other variables	Control	Control	Control	Control	Control	Control
Time fixed effects	Control	Control	Control	Control	Control	Control
Individual fixed effects	Control	Control	Control	Control	Control	Control
Observations	3472	2662	3472	3480	2662	3480
R-squared	0.128	0.174	0.148	0.233	0.214	0.229

Significance levels: ***p < .001, **p < .01, *p < .05. Note: The control variables are the same as those in Table 2; because of space limits, the regression results are not reported for the other control variables.

Discussion

To conclude, our Hypothesis 1 is supported by the data. The inter-generational contract is found to be a key pathway in explaining how public pensions affect childrens’ family support. Specifically, public pensions facilitate bidirectional financial transfers in empty-nest families, thereby encouraging children to provide more financial support to parents in return. However, public pensions also have crowding-out effects on children’s financial and care support by discouraging time-for-money transfers. Empty-nest parents who receive pensions are less likely to provide time-consuming care support, potentially reducing the financial and care support received from their children. These findings are consistent with the specialization model, which suggests that both crowding-out and crowding-in effects of national welfare can coexist because family members adjust their supportive strategies in response to the availability of public assistance (Brandt et al., 2009). Furthermore, we also find that public pension may prompt parents to adjust their investment strategies in the contract, replacing the time-consuming care with downward financial transfers.

In Hypothesis 2, we hypothesize intimacy could be another efficient pathway in explaining how public pensions can impact family support, and it is supported by the data. The receipt of pensions from NRSPI improves intergenerational relationships, thereby promoting children’s family support to older parents. This may be attributed to the fact that public pensions encourage resource exchange, significantly enhancing family intimacy and resulting in more frequent mutual assistance among family members. Several studies have suggested that reciprocity and resource exchange among family members can be considered an expression of intimacy and can improve family relationships (Zelizer, 2007; Zhu & Walker, 2019). Additionally, this finding provides empirical evidence supporting previous studies that suggested generous welfare programs can promote inter-generational solidarity, thereby encouraging children to support older family members (Reil-Held, 2006b).

Our findings also contribute to the social policy implications in rural China and other regions. Firstly, our findings support the notion of the crowding-in effect in the ongoing discussion on how public pensions affect family support. It states that extensive implementation of the NRSPI strengthens family bonds for empty-nest older parents. Despite the modest subsidies, the rural pension enhances the social capital of older parents and encourages mutual assistance and resource exchange within families. Therefore, future pension reforms in rural China should prioritize improving the benefit levels of the NRSPI and fully harnessing the potential of families in caregiving. Moreover, our findings also contribute to the worldwide debate between the state and the family. They substantiate the view that national welfare and family support are complementary in addressing old-age care responsibilities. Therefore, we suggest that the state and government should also provide essential social services to empty-nest families, such as home-based care, to assist families in addressing the labor-intensive care works and alleviating their care burdens.

Limitations

Our study has several limitations on research design. Firstly, some important variables such as public pension benefit levels, grandparent care, and amount of other public transfers, are missing in the CLASS survey. These key factors may provide a more powerful explanation of the effects of public pension. Secondly, we have considered the interrelationships between children’s financial (DV1) and care support (DV2) to parents, which is often overlooked in previous studies. However, due to space constraints in our manuscript, our treatment of these effects is simplified and may result in correlated residual errors and multicollinearity, despite efforts to adapt the fixed effects models to mitigate these problems. Thirdly, the use of the transformed child-parent dyad data may introduce cluster effects. The cases of children within the same family share parental characteristics, and the support provided by parents to each child within the same family may exhibit correlation. Addressing this effect is challenging due to the large number of families (or clusters). Lastly, as the two-year panel data is inadequate for determining the temporal order of resource exchanges, we simplify the logic of inter-generational exchanges. It is possible that some children may increase financial support to their older parents immediately after the parents receive pensions, with the expectation of receiving financial support in return. To investigate this aspect, we should utilize more comprehensive data in future studies.

Conclusion

Our study found that China’s rural public pensions can promote children’s family support for rural empty-nest older parents through enhancing intergenerational contracts and intimate relationships in their families. In this process, parents might adjust their investment strategies in the intergenerational contract, by replacing time-consuming care support with higher levels of downward financial transfer. Our conclusion provides a theoretical perspective to explain public pensions’ crowding-in and crowding-out effects. It also provides valuable insights into past pension reforms in rural China and contributes to the worldwide debate regarding the allocation of old-age care responsibilities between the state and the family, offering valuable policy recommendations for the future.

Key Points

• Public pensions can promote children’s family support for rural empty-nest older parents through enhancing inter-generational contract and family intimacy.

• Public pensions encourage parents’ downward financial transfers and improve family relationships, promoting (or crowding in) children’s financial and care support to them.

• Public pensions discourage parents’ care support for children, potentially reducing (or crowding out) children’s financial and care support. But this crowding-out effect is limited and cannot counteract the crowding-in effects from other pathways.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The author(s) reported there is no funding associated with the work featured in this article.