It Takes a Village: Health and Old-Age Support in China

How do older individuals cope with health impairments and the potential economic losses that ensue? Exploiting longitudinal data on a nationally representative sample of Chinese seniors, we investigate whether and how familial economic support responds to sudden and sizable changes in health. We find that both financial and instrumental support from children go up following a health shock. Furthermore, financial transfers coming from siblings, other relatives and friends increase by a larger percentage than those from children. We also find evidence that instrumental care received from a spouse responds strongly to health shocks. Finally, we find that although labor supply and earned income drop considerably, there is no significant change in non-health expenditure. Our results suggest that households are able to cope with some of the adverse economic impacts of health shocks by relying on support networks that extend beyond their children and grand-children. This is particularly relevant in the context of shrinking family sizes resulting from stringent family planning policies. JEL Classification: D64, J14