Effect of Public Pensions on Inequality of Opportunity in China

ABSTRACT Employing data from the China Household Finance Survey (CHFS) from 2013 to 2019 and utilizing regression‐based approaches, this study examines how the public pension system (PPS) marginally affects overall income inequality, inequality of opportunity (IOp), and poverty in China. Our results show that PPS alleviates overall income inequality and diminishes poverty, but is not effective in reducing IOp. Particularly, it worsens IOp among the elderly households. Age disparity is alleviated by the PPS, while the disparities between hukou and residential provinces are significantly raised. Furthermore, the quantile‐based analysis indicates that PPS has diverse marginal impacts on households across the income distribution. Our findings suggest that policy efforts should focus on these persistent challenges, with reforms on pension and other institutional issues.