Do Traditional Family Values Restrain Participation in Commercial Pension Plans Among the Urban Population？ A Study Based on the Perspectives of Financial Trust and Financial Literacy
Summary:
In China, accelerating population aging is increasing the national eldercare burden. To address this problem, China has implemented a proactive national strategy that includes a multi-pillar pension system. In addition to the state-run first pillar and employment-based second pillar, the third pillar comprises personal retirement products. However, the rate of participation in commercial pension plans is far lower in China than in developed economies. The studies on this limited participation phenomenon focus on various factors, such as institutional setups and policies, financial market development and individual and household characteristics. However, these studies are based on the “economic man”assumption while largely ignoring crucial cultural factors. Culture has important effects on individual financial behaviors. It not only affects the formal and informal institutional arrangements in which personal financial activities are embedded but also influences individuals' preferences for risk, liquidity and consumption. All of which shape individuals' financial decision-making. Chinese traditional values are centered on family and strongly emphasize raising children for old age and filial piety, which profoundly influence individual participation in commercial pension plans. Individual trust in financial institutions and individual financial literacy are other important cultural factors that affect the likelihood of participation in commercial pension plans. Drawing on the CHFS2015 dataset, this study examines how traditional Chinese family values shape financial trust and financial literacy, which in turn influence individual participation in commercial pension plans. The CHFS, a biennial national survey, was first conducted in 2011. It covers a large sample of households from 29 of the 34 Chinese provinces and records detailed information on many variables, such as household income, consumption, financial assets, housing, debt and demographic characteristics. This study's sample consists of 15,659 urban residents who participated in the CHFS2015 and provided complete information on the variables of interest. Methodologically, we first construct an index of traditional family values using factor analysis. We then use ordinary least squares and logistic regressions to examine the effects of traditional family values, financial literacy and financial trust on participation in commercial pension plans. The Sobel, KHB and bootstrap tests are used to verify the mediating effects of financial trust and financial literacy on the relationship between traditional family values and participation in commercial pension plans. Instrumental variable estimation is also used to address endogeneity concerns. Additionally, we assess robustness by changing the samples and the measurements of the variables. Finally, we examine the effects on subgroups divided by region, educational level and occupation. The empirical results show that traditional family values inhibit Chinese urban residents from purchasing commercial pensions. The finding remains valid after accounting for endogeneity. Further analysis indicates that financial trust and financial literacy mediate the relationship between traditional family values and participation in commercial pension plans. Specifically, traditional family values reduce individual trust in financial institutions and divert attention from financial information, thus inhibiting participation in commercial pension plans. Meanwhile, traditional family values are also associated with a lower level of financial literacy, which tends to decrease the likelihood of purchasing a commercial pension. Our analysis also reveals that the negative effects of traditional family values are more prominent in underdeveloped regions and among less educated people. In contrast to the rational economic perspective, this study offers a cultural perspective and thus sheds new light on individuals' financial behaviors and financial market development. It not only enriches our understanding of these topics but also has important practical implications. First, Chinese elderly people, who are deeply influenced by traditional family values, prefer to rely on their children and families and thus require innovative family-based elderly care policies and solutions to meet their needs. Second, China should provide more information channels to improve individual financial literacy and financial market regulation and boost public trust in financial institutions. Last but not least, people living in inland provinces and those without a college education would be better served by a more inclusive financial system. In conclusion, China's elderly care pension market has great potential. All market participants should take the available opportunities and meet its challenges to develop the market in an equitable, balanced and high-quality manner.
郑路, 徐旻霞. 传统家庭观念抑制了城镇居民商业养老保险参与吗？———基于金融信任与金融素养视角的实证分析[J]. 金融研究, 2021, 492(6): 133-151.
ZHENG Lu, XU Minxia. Do Traditional Family Values Restrain Participation in Commercial Pension Plans Among the Urban Population？ A Study Based on the Perspectives of Financial Trust and Financial Literacy. Journal of Financial Research, 2021, 492(6): 133-151.
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