Tradeoffs between Public and Private Economic Support of the Elderly

The purpose of this study is to examine how public money transfers affect private money transfers. Analyses draw on a natural experiment in Taiwan, where two subsidy programs for the elderly were implemented in 1994-1995. One program targeted farmers age 65 years and older throughout Taiwan. The other subsidy program was tied to political elections and implemented in 5 of the survey hsiens (counties) and cities. Nationally representative, longitudinal data from 1989-1996 on approximately 4,000 older persons are used to examine how private transfers vary with receipt of public transfers and whether the subsidy programs had an impact on reliance on family for major financial support. Private transfers have been the major source of income for the elderly in Taiwan, but a dramatic shift occurred in the mid1990s towards pension income, even among those elderly who had previously relied on family financial support. Multivariate results indicate that the farmers pension program had a significant and positive effect on the likelihood that older persons switched from private transfers as their main source of income in 1993 to pension income in 1996. In contrast, the hsien and city-level subsidy program had little effect on the move away from private transfer income as a main source of support.