The crowding-out effect of elderly support expenditure on household consumption from the perspective of population aging: evidence from China

Abstract The pace of aging in China is accelerating, from the introduction of family planning to the liberalization of the two-child policy, with a growing proportion of families in the 4–2-1 structure. With filial piety in mind, most adult children will live with their elderly parents and share income and expenditure. Concurrently, due to the inadequacy of the social security system, a heavy supplementary burden of supporting the elderly has been placed on adult children. Based on data from the 2011, 2013, 2015, and 2017 Chinese Social Survey (CSS) of the Chinese Academy of Social Sciences (CASS), this study analyzes the objective factors affecting household elderly support expenditure using the ordinary least squares (OLS) estimation method. It also examines the crowding-out effect of elderly support expenditure on the consumption of different types of households through a panel generalized method of moments (GMM) approach. Finally, the crowding-out effect of elderly support expenditure is discussed in a sub-sample according to the number of households needing to support the elderly aged 60 and above. The empirical results illustrate that there is a crowding-out effect of elderly support expenditure on household consumption, and the magnitude of the crowding-out effect varies for diverse consumption. Our study reveals that the crowding-out effect of elderly support expenditure on core consumption is the largest in a sample with different numbers of elderly persons in families. The empirical results for the sub-sample show that the larger the elderly population, the stronger the crowding-out effect of elderly support expenditure on core consumption and the less pronounced the effect on marginal consumption.