Assessing The Impact Of Public Transfers On Private Transfers

Private transfers are resources reallocation among families, friends and even neighborhoods which are widespread throughout the world, especially in developing countries. Private transfers have the same important role as public transfers in protecting households against uninsured income risks and reducing poverty risk. In China, the pressure of aging population and the building of people’s livelihood government’s goal make the government to gradually expand the coverage of the social security and the scale of spending. On the other hand, the culture of old-support as well as the uncertainty of the risk makes private transfers widespread throughout the country. What’s the motive of private transfers between families? this paper investigates the role of public transfers as one of the main tools of social safety nets by testing the effect on the motives for public transfers and their crowding-out effect on private transfers which will have positive effect on not only providing reference for formulating and evaluating public policy, but also can help to analyze household behavior.The thesis is divided into five sections:Chaperl. Introduction. This section introduces the background and significance of the topic, list innovations and shortages. Chaper2. Literature reviews. This section reviews the related domestic and foreign literatures. Chaper3. Analytical framework. This part provides the theory of motivation for private transfers and builds an empirical model. Chapter4. Empirical analysis. This section firstly provides the description of statistics about the probability and amount of transfers. And then, this part provides empirical analysis. By Ⅳ Probit and Ⅳ Tobit, this part analyze the effect of variables to the probability and amount of private transfers, such as the head of household variables (gender, age, residence, education, working conditions, living conditions), family characteristic variables (family size, number of children, children characteristic variables), geography variables (urban and rural areas, province)and pre-transfer income variables, to test the non-monotonic motives behind the transfers and to find if there is a crowding-out or crowding-in effect between public and private transfers under non-monotonic motive. Chapter5. Conclusions. The final section offers a conclusion and provides policy recommendations.The finding suggests that, in China, both motives may co-exist in the same dataset, but more tend to exchange motive, the probability of receiving private transfers increases with household-size, but for a given household size, having fewer children, lower education level, take-caring of grandchildren will increase the probability as well as the amount of private transfers. But no matter what kind of motivation, public transfers had a significant crowding-out effect on private transfers, the increase of public transfers will reduce the probability and amount of private transfers. The findings suggest that risk sharing is not central to transfers. Altruistic transfers are apparent for the upper income class, but not a low income level. The evidence implies that crowding out may be minimal at a low income level, suggesting that public transfers targeting poor households may be effective. At the same time, with the increase of pre-transfer income, there is an increase in the amount of public transfer which means that public transfers on narrowing the income gap is not valid.The findings also suggest that private transfers in China have regional characteristics. Compared to the coastal province, inland province is more tend to family-based support, a wider range of net private transfer provider and lower "crowing-out" amount of private transfers. However, we also found that there is of different between the conclusions of overall sample and sub-region statistics in private transfer motivation, public transfer rate, education level of household, health condition, children’s residence. In Gansu, there is a negative relationship between pre-transfer income and amount of private transfers the family can receive, while in Zhejiang, there is a positive relationship between pre-transfer income and amount of private transfers the family can receive which tend to exchange motive.