The Study On Welfare Effect Of Fiscal Subsidy For Rural Residents’ Endowment Insurance

In September,2009,the State Council promoted the pilot project of new rural endowment insurance system(NREIS hereafter),which was nearly promoted nationwide in 2012.In February,2014,the NREIS was combined with the urban social endowment insurance system nationwide,which contributed to the establishment of the united urban-rural basic endowment insurance system.Based on the NREIS,the basic endowment insurance system of rural residents came into effect(BEIRR hereafter)and became the main part of the China social security system which characterized by being all-covered,basic insurance providing,multi-leveled and sustainable.From the view of system design,BEIRR shares almost the same systematic frame of the NREIS and therefore fiscal subsidy keeps as its core and feature.The fiscal subsidy policy of the BEIRR is the important measure to promote the implementation of the rural social insurance system at the country level and government level.It plays a crucial role in BEIRR’s promotion and sustained development.For the rural elders,it works directly at the guarantee of basic life and payment of the premium and indirectly at the balance of income distribution and stimulation of rural consumption.It means significantly in improving the rural social welfare,realizing the balanced development of the urban and rural areas and maintaining of the social equity,justice,harmony and stability.How well does the current BEIRR fiscal subsidy policy affect? What exact welfare effects has it brought? How does the policy bring all the welfare effects ?Whether the effects deserve the fiscal expenditure or not ? How to optimize the policy so that it can works better ? The answers of all these questions are the key points to keep the sustained and healthy development of the BEIRR.Therefore,based on the study principle of combining the normative analysis and empirical analysis,taking China’s rural endowment environment into fully consideration,this paper mainly discusses the welfare effects of the BEIRR fiscal subsidy.Based on the literature review of domestic and foreign research and the analysis of the policy envolvement and current situation,supported by such theories as welfare effects,fiscal subsidy,risk sharing,etc.,the paper firstly analyses the mechanisms of action of the policy in ensurance of the basic life of farmers,adjustment of the incomedistribution,promotion of the rural consumption and stimulation of the premium payment and builds a theoretical analytical framework of the BEIRR welfare effects.Then,in view of the CHARLS data and empirical research data,the payment and income model,fixed effect model,discounted incremental utility model,etc.are constructed to calculate and analyze the main welfare effects.Conclusions are reached as follows:1.The fiscal subsidy of BEIRR has the welfare effect to ensure the basic livelihood of farmers,but the actual guarantee level is seriously low.Based on the calculation and analysis of individual account pension replacement rate and pension moderate level from the perspective of balance between supply and demand in the capital city of Hunan Province,the actual guarantee level of the rural resident insurance is seriously low.Under the reasonable assumption of the current system,the average level of the rural resident insurance system in Changsha can not realize the policy intention of maintaining the basic level until 2030.Set on the basic pension coefficient of 8%,individual payment growth rate of 5% is introduced,under the assumption of increasing 5% fund yields rate,the low level goal of “basic insurance”can be achieved till 2030;introducing 5% payment subsidies rate,increasing 10%basic pension adjustment coefficient,the medium level goal “basic insurance” can be achieved till 2030.The increasing parameters: when r=5.5%,f=12%,g=5.5%,k=5.5%,the high level goal of “basic insurance” can be achieved till 2030.2.The fiscal subsidy policy of BEIRR has the welfare effects of adjusting the regional and inter-generational income distribution while an unbalanced transfer effect.It plays a significant role in narrowing the income gap among the east,central and west areas,thus improving the level of social welfare in rural areas,which brings a positive income redistribution effect.Limited by the developing level of local economics,local fiscal subsidies doesn’t show obvious adjustment effect in regional income distribution and its local adjustment effects will also become weaken with time passing by if the treatment level of rural resident insurance stays unchanged for a long time.The earlier the famers participated in the rural resident insurance,the higher income of the pension they will get,While the transfer rate appears to increase first and then decrease.For insured famers of the same age,different premium grades will bring different pension income,insured farmers choosed the premium grade,the pension income will be continuously increased,but the transfer rate has been declining.3.The time trend of fiscal subsidy in promoting the farmer’s consumption is weak and the regional performances are also different.For the rural households that receive pensions,the basic pension directly increases the income of rural elders in the current period,and also in turn increases the future earnings expectation of rural residents,thus promoting consumption.The reality is that with the increase of rural insurance policy running time,the relationship between the payment and benefit will be increasingly clear and the promoting effect of the consumption will disappear,which will bring the rural household consumption the crowding-out effects if the families have no pensions and therefore restrict the farmer’s consumption.Rural insurance subsidies play a stimulating effect to both central and western rural residents’ consumption,but the effect is not significant for the eastern rural resident’s consumption.4.The incentive effect of the subsidy on farmers’ insurance contributions is limited,and it is a rational choice for the majority of participants to choose the minimum annual payment.The minimum annual payment is a rational choice for most farmers.Male farmers are less willing to pay than women farmers;Farmers with lower incomes have the lowest social security contributions compared to higher-income farmers.Younger farmers are less likely to pay more than older farmers,and young people are less willing to pay.Although farmers in poor areas have higher participation rates than farmers in rich areas,farmers in poor areas are more likely to choose lower social security contributions due to their limited budgets.According to the above analysis and the problems as a result of the empirical study,policy recommendations are proposed aiming at optimizing the fiscal subsidies.The recommendations are as follows: 1)Increase subsidies and improve the farmer’s endowment payment;2)Balance the regional gap of the fiscal subsidies and strengthen the adjustment role of the income distribution;3)Reinforce the continuity of the fiscal subsidies and improve the insured farmer’s consumption ability;4)Intensify the promoting function of the fiscal subsidies and stimulate farmer’s enthusiasm for premium payment.