Journal of Integrative Agriculture 2021, 20(4): 1060–1067

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RESEARCH ARTICLE

The effects of social security expenditure on reducing income

inequality and rural poverty in China

YU Le-rong, LI Xiao-yun

College of Humanities and Development, China Agricultural University, Beijing 100193, P.R.China

Abstract
Social security has, as one of its primary aims, the provision of financial support to those deemed to be poor or facing the
threat of poverty. Based on China’s national statistical data covering social insurance, social assistance, and social welfare
between the period 1978–2018, this paper evaluates the effect of social security expenditure in reducing income inequality
and rural poverty with cointegration analysis. It was found that there is a positive correlation between social security
expenditure and the income gap of urban and rural residents in the long run, but the effect is very limited; nearly 99% of the
changes of the urban–rural income gap come from its own contributions. Further research also shows that the elasticity of
rural poverty incidence to social security expenditure is –0.2255, which indicates social security expenditure helps reduce
rural absolute poverty. Based on these findings, the policy implications can be that much social security expenditure and a
more equitable social security system should be encouraged. It will become one of the major anti-poverty strategies after
2020 in China when we win the battle against absolute poverty.

Keywords: social security expenditure, income inequality, rural poverty reduction in China

Development (OECD) standards, the Chinese social security

1. Introduction
The objective of the social security system is to maintain
social fairness and stability and promote economic
development. Over the past fourty years, China has built
the world’s largest social security system, and social security
expenditure has increased gradually (Zheng 2018). Different
from the Organization of Economic Co-operation and
Received 25 April, 2020 Accepted 31 August, 2020
Correspondence YU Le-rong, Tel/Fax: +86-10-62737725, E-mail:
yulerong@cau.edu.cn; LI Xiao-yun, E-mail: xiaoyun@cau.edu.cn
© 2021 CAAS. Published by Elsevier B.V. This is an open
access article under the CC BY-NC-ND license (http://
creativecommons.org/licenses/by-nc-nd/4.0/).
doi: 10.1016/S2095-3119(20)63404-9
system consists of social insurance, social assistance, and
social welfare and has been well-rounded developed since
2000 (Zheng 2019). The ratio of social security expenditure
to gross domestic product (GDP) increased from 5.9%
in 2008 to 11.5% in 2015 (Cha and Pan 2017), while in
2017, social security expenditure was the leading item in
government expenditures (Zhang et al. 2019). However,
the effect of social security on the relief of social inequality
is still a worthy topic.
Bridging the social gap amongst varied regions and
groups refers to two aspects. On the one hand, reducing
the number of poor living below the certain poverty line; on
the other hand, narrowing the income gap between the rich
and the poor. China has made remarkable achievements
on rural poverty reduction over the past 40 years. The rural
poverty headcounts decreased from 98.99 million in 2012 to
16.69 million in 2018, according to the National Bureau of
 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067
Statistics of China (NBSC), while the rural poverty headcount
ratio declined from 10.2% in 2012 to 1.7% in 2018. But when
looking at the income gap change, particularly the income
ratio of urban to rural residents, the story is different. The
ratio changed from 2.57 in 1978 to 3.03 in 2002, and again
2.69 in 2018, which represented the rising income inequality
since the reform and opening-up in China (NBSC 2019a).
Hence, how to understand the role of social security in
reducing social inequality in China has triggered a heated
discussion. Theoretically, social security pursues fairness
as an important way in income redistribution by using direct
cash transfer as a tool to reduce income inequality. In the
meanwhile, some specific social security programs provide
the social safety net if one is falling below the minimum
living standard associated with shocks from illness, natural
disaster, or other risks.
From the empirical aspect, there are some studies on
social security expenditure and the relief of social gap, which
also cover issues of human well-being, poverty reduction
and narrowing of the income gap. Experiences from high-
income countries show a more significant association
between social expenditures and life expectancy across
the OECD countries. In contrast, lower expenditures on
social policies in the United States may contribute to less-
favorable trends in life expectancy (Reynolds and Avendano
2018). He and Sato (2011) find that social security in
developed countries contributes 74.6% to reducing the
Gini coefficient. An empirical study across regions and
countries shows that after social security adjustment, the
Gini coefficient measured by residents’ disposable income
has dropped by more than 35% in some countries of
western and northern Europe, with the absolute values all
falling below 0.3 (Xue 2013). Caminada and Goudswaard
(2001) argue that the worsened income inequality in the
Netherlands between 1981 and 1997 was caused mainly
by unequal primary distribution and a decrease in social
transfer payments, especially by the social security reform
that led to the decline in fiscal expenditure. This proves
that social security indeed depresses income inequality.
Comparatively speaking, the contribution of social security
in Latin American countries to the Gini coefficient is far
less than that in developed countries. Jesuit and Mahler
(2004) find that social security’s contribution to the decline
of the Gini coefficient in Latin American countries is about
15%. However, transfer payment in education and health
can reduce inequality more than cash transfer payment
(Beneke et al. 2017).
As for the impact of social security policies on poverty
reduction, research based on micro-data at the level of
households shows that although social security is helpful
to poverty reduction, the effects differ in various households
of different countries. The study in India proves that five
1061
programs consisting of school meals, child care services,
employment guarantee, food subsidies, and security
pensions can be seen as partial foundations of the social
security system that have an important contribution to human
well-being (Dreze and Khera 2017). An empirical study at
the household level in Vietnam shows that social security
(including pension and social assistance) significantly
increases farmers’ expenditure, especially non-food
expenditure, and has a significant poverty reduction effect
on farmers (Cuong 2013). Devereux (2002) explored the
impact of social safety nets on reducing chronic poverty
in three southern Africa countries. The results show that
Namibia’s pension program, Mozambique’s direct cash
payment to the urban poor, and Zambia’s intervention
program to provide public employment have achieved
positive poverty reduction effects. Hence, similar social
protection nets in transfer payment can achieve social
protection and promote safety. Besides the specific
spending on social programs, the research from Chriest
and Niles (2018) explores the influence of social capital on
the U.S. rural community responses to extreme weather
events. They find that communities with high levels of social
capital prior to the extreme weather event had effective
actions in improving and stabilizing community food security
immediately after the event. This gives us an important
reminder that rural communities or villages are key actors
when coping with shocks from natural disaster, pandemic
or other sudden events (Luo et al. 2020). The research
results of Chen et al. (2019) based on the sample survey of
data from the National Bureau of Statistics of China in 2015
show that the urban poverty rate has dropped from 17.0 to
7.2% after the low-income population received the Chinese
urban minimum living allowance. However, the effect of the
Chinese rural minimum living allowance system (Dibao) on
poverty reduction in rural areas is not as much as urban’s.
The incidence of poverty in rural areas was 14.4% at first,
and the incidence of poverty dropped to 10.6% after the
poor groups in rural village got the Chinese rural minimum
living allowance.
When we summarize the previous studies, there are two
research characteristics to be found. First, a great deal
of studies focus on the single objective of social security
policy, either income inequality usually represented with
Gini coefficient or poverty reduction indicated with the
household’s income. For example, some researchers
examine the relationship between social security level
and the income-based Gini coefficient to evaluate social
security expenditure’s role in adjusting income redistribution.
Other researchers assess the impact of social security
policies and programs in the form of transfer payments
on farmers’ income and consumption to find the impact of
these policies and programs on poverty reduction. Second,
1062 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067
both macro- and micro-level researches are included in
the existing literature. Macro-level research focuses on
the comparative study of countries or regions and pays
more attention to the relationship between social security
expenditure and economic growth to assess whether
social security policies are compatible with the national
strength. Micro-level research more often uses household-
level data to assess the specific impact of public transfer
payments on recipients’ income and consumption. Yet,
few studies combine social security policies with income
distribution and poverty alleviation; in particular, studies
that comprehensively evaluate the effects of China’s
social security policy in the past 40 years of reform and
opening-up are rarely seen. There are two constraints
that cause this. First, it may be due to the limitation of
data. In China, social security management involves
different government departments, including the Ministry
of Finance, the Ministry of Human Resources and Social
Security, the Ministry of Civil Affairs, and the National Health
Commission. Each department independently accounts
for its income and expenditure, so it is difficult to obtain
comprehensive and consistent data. Second, the historical
division of China’s urban and rural social security systems
also makes it difficult to have a unified evaluation of social
security expenditure. Considering the above limitations, we
empirically analyze the dynamic relationship between social
security expenditure (SSE) and the urban–rural income gap
(URIG), and the relationship between SSE and rural poverty
reduction in the period of 1978–2018, based on the narrow-
sense SSE statistical data and by the cointegrated analysis.
Then we put forward some suggestions about the role of
social security in solving relative poverty after the year 2020
according to the empirical analysis results.
The remainder of this paper is organized as follows: The
next section provides the data and a brief discussion of
the unit root test and the cointegration analysis. Section 3
provides empirical results. Section 4 presents discussions.
Finally, the last section offers conclusion and policy
implications.
2. Data and methods
2.1. Data and variable definitions
In this paper, we use two variables to demonstrate the effect
of SSE on the relief of social inequality. One is the urban–
rural disposable income ratio, which reflects the URIG,
and the other is the rural poverty headcount ratio (RPHR),
which was released by the National Bureau of Statistics of
China according to the certain poverty line (NBSC 2019b).
The basic variable is SSE, and the sample interval is from
1978 to 2018.
China’s current social security system is mainly composed
of four items, namely social insurance, social welfare, social
relief, and social special care. In China’s relevant statistical
yearbooks, social insurance and social welfare usually mix
with each other, and the pension insurance benefits for
retired and working employees are calculated separately.
The data used in this paper are from the Finance Yearbook
of China and China Statistical Yearbook over the years.
In and before 2006, SSE was the sum of pension, social
welfare relief, and price subsidies. Starting from 2007, the
statistics cover social security and employment expenditures
including administration fees, financial subsidies to
social insurance funds, retirement pension for retirees of
administrative institutions, employment subsidies, pension
for a bereaved family, retirement settlement, social welfare,
undertakings for the disabled, natural disaster relief, Red
Cross undertakings, minimum living allowance, temporary
relief, support for extremely poor people and other living
assistance. All expenditures can be classified into four
types: social insurance, social assistance, social welfare,
and other expenditure items.
The disposable income data of urban and rural residents
come from China Statistical Yearbook over the years. The
data on RPHR in China come from Poverty Monitoring
Report of Rural China released by the National Bureau
of Statistics of China. It should be noted that due to the
adjustment of the rural poverty standard by the Chinese
government in 2011, the current poverty standard, which is
2 300 CNY per capita calculated per annum based on the
price level of 2010, is higher than the line of 1.9 USD per
capita a day used by the World Bank for the global poverty
monitoring but lower than the line of 3.2 USD per capita
a day representing moderate international poverty level.
It is clear that this national poverty line defines China’s
rural absolute poverty instead of relative poverty, either
urban poverty (Wang et al. 2015; Xian et al. 2016). The
time coverage of the data obtained on the RPHR ranges
from 1978 to 2018, while we dealt with the missing data
predictably in light of the time trend. In addition, the data
on RPHR from 2000 to 2010 are obtained according to
the old poverty line of 1 196 CNY, which is equivalent to
180 USD per capita calculated per annum. Hence, in the
analysis of this paper, the data on the poverty incidence
of consecutive years under the two standards are used.
Poverty between 1978–2018 is the rural poverty incidence
under the current standard, recorded as H1, while the
poverty of 2000–2010 is the rural poverty incidence under
the old standard, recorded as H2.
The cointegration analysis consists of four steps. First,
we conduct a unit root test to diagnose whether the time
series data are stationary or not. Second, we use EG-ADF
(EG-Augmented Dickey–Fuller) test developed by Engle
 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067 1063

and Granger (1987) for the cointegration relationship. Third,
we establish the Error Correction Model (ECM) to examine
for short-run and long-run causalities between two sets of
variables, SSE and URIG as well as SSE and RPHR. Fourth,
the impulse response function and variance decomposition
are followed. To eliminate the heteroscedasticity of the
variables as far as possible, the variables take a logarithmic
form, i.e., SSE takes the logarithmic form, which denotes
lnSSE, URIG takes the logarithmic form, which denotes
lnURIG, and RPHR including H1 and H2 are in logarithmic
forms as well.
2.2. Unit root test
In order to judge whether the time series data are stationary,
the ADF unit root test is used in this paper. The variables
lnSSE, lnURIG, and lnRPHR are tested for stationarity. If
the time series data are non-stationary, then the Ordinary
Least Square (OLS) regression will lead to false regression.
If non-stationary time series data become stationary after
the time trend is removed, for example, when the first-order
difference of the time series is a stationary process, it is
called First-order Mono-intergration time series.
Table 1 presents the unit root tests. At the 5% significance
level, two series of lnURIG and lnSSE have a unit root;
and at the 10% significance level, the series of lnH2 has
a unit root. However, after first-order difference, the three
series have no unit root at the corresponding significance
level, i.e., the first-order difference of the original series is
stationary. Using these results, we proceed to test URIG and
SSE as well as RPHR and SSE for cointegration in order to
determine if there is a long-run relationship to control for in
the econometric specification. Unfortunately, the series H1,
a rural poverty rate covering 40 years, cannot pass the unit
root test; it is impossible to carry out cointegration analysis
on H1 and SSE since 1978. While, the series H2 passed the
test. Therefore, we conducted the following analysis using
the series H2 representing RPHR of 2000–2010.
2.3. Cointegration test and error correction model
As for the cointegration test, Engle and Granger (1987) put
forward the EG-ADF test in 1987. The core idea is that
although some economic variables have their own long-term
fluctuation patterns, and if of the same order integration,
there is a long-term stable proportional relationship between
them; that is, there is a long-term stable equilibrium
relationship between variables. The EG-ADF test method
is suitable for the cointegration test of two variables. In this
paper, the EG-ADF test is used to test the cointegration
relationship between lnURIG and lnSSE and between lnH2
and lnSSE, respectively. The two cointegration equations
estimated by the OLS method are:
lnURIG=0.5799+0.052lnSSE+e1t  (1)
(6.97) (4.57)
R2=0.35 DW(2, 41)=0.21
lnH2=3.9807−0.3126lnSSE+e2t (2)
(9.96) (–6.19)
R2=0.81 DW(2, 11)=1.65
Table  2 gives the results of the unit root test for two
residual series. Since the ADF values (absolute values)
of the two residual series are both greater than the critical
value at the 10% significance level, the statistics significantly
reject the null of no cointegration, and it can be predicted
that SSE and URIG are likely to converge in the long run.
From 2000 to 2010, there is a cointegration relationship
between SSE and H2 at the 10% level.
The above cointegration test shows a long-term
equilibrium relationship between economic variables,
but the short-term changes of variables are part of the
adjustment towards this long-term equilibrium relationship.
To reflect the impact of such short-term changes, an Error
Correction Model (ECM) needs to be introduced to make
the estimation more accurate and effective. The following
is the estimated result of the error correction model. The
differences of variables are used in the ECM models for the
sake of deducting fluctuations of the data with time.

Table 1 Results of unit root tests1)

Critical value at 5%/10%
Variable2) Abbreviation3) ADF value Conclusion
significance level
Logrithm of urban rual income gap lnURIG –1.020 –2.958 Non-stationary
Difference of lnURIG ΔlnURIG –3.995 –2.961 Stationary
Logrithm of social security expenditure lnSSE –1.222 –2.958 Non-stationary
Lag of logrithm of social security expenditure ΔlnSSE –7.405 –2.961 Stationary
Logrithm of rural poverty headcount with the old lnH2 –0.538 –2.630 Non-stationary
poverty line
Difference of lnH2 ΔlnH2 –2.773 –2.630 Stationary
1)
The type of ADF test in stata15.0 is (c, 0, 0).
2)
The first four variables are significant at the 5% level, while the last two variables are significant at the 10% level due to a short time
span.
3)
Δ represents the difference for all variables between two years, for example, t and t–1.
1064 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067

ΔlnURIGt=0.005+0.0513ΔlnSSEt–0.6005ECMt–1 (3)
(0.07) (1.85) (–4.13)
ΔlnH2t=–0.0145–0.2255ΔlnSSEt–1.0822ECMt–1 (4)
(–0.25) (–1.57) (–2.90)
The error correction model (3) reflects the short-term
fluctuation pattern of the urban–rural income ratio affected
by social security expenditure and other variables. The
result shows that there is a positive correlation between
URIG and SSE with a coefficient of 0.0513. However,
the coefficient of error correction term is –0.6005, which
indicates that when the short-term fluctuation deviates from
the long-term equilibrium, the ECM correction term can
pull the non-equilibrium state back to the equilibrium state
with the adjustment strength of 0.6005. The coefficient is
negative, indicating that the error correction term plays a
negative role.
The error correction model (4) shows that H2 which
represents RPHR of 2000–2010 negatively correlates
with fiscal SSE. The coefficient is –0.2255, and the error
correction coefficient is –1.0822, which indicates that
when short-term fluctuations deviate from the long-term
Table 2 Unit root test of residual series1)
Critical value at 10%
Variable ADF value
significance level
e1t –2.869 –2.614
e2t –2.665 –2.630
1)
The test type is (c, 0, 2) for e1 and (c, 0, 0) for e2.
equilibrium, the ECM term can pull the non-equilibrium state
back to the equilibrium state with the adjustment strength
of 1.0822. The coefficient is negative, indicating that the
cointegration relationship has reduced the incidence of
poverty.
2.4. Causality test
Once the two variables are cointegrated, the next step is to
implement the causality test. We use the Granger causality
test to check the cause-effect relationship between the two
groups: URIG and fiscal SSE, and H2 and fiscal SSE. The
test results in Table 3 show that SSE is the cause of URIG,
and there is a one-way Granger causality between SSE and
URIG. Similarly, the test results show that there is also a
one-way Granger causality between fiscal SSE and RPHR
from 2000 to 2010.
2.5. Impulse response function and variance
decomposition
Based on cointegration analysis, we further observed the
results of the generalized impulse response curves between
variables. Fig. 1 shows that after the variable lnURIG is
Conclusion impacted by a positive pulse of one unit of the variable
Stationary lnSSE, the impulse responses that it reflects are all positive.
Stationary This further confirms that fiscal SSE has a positive impact on
URIG. Similarly, after the impulse response results between

Table 3 Causality test results

Null hypothesis Lag order Chi-square statistics P-value Conclusion
ΔlnSSE is not the Granger cause of ΔlnURIG 2 5.1763 0.023 Rejected
ΔlnURIG is not the Granger cause of ΔlnSSE 2 0.4534 0.483 Accepted
ΔlnSSE is not the Granger cause of ΔlnH2 2 6.1745 0.013 Rejected
ΔlnH2 is not the Granger cause of ΔlnSSE 2 0.1454 0.703 Accepted

95% Cl Orthogonalized irf

0.03 0.05
Response of lnURIG to lnSSE

Response of lnH2 to lnSSE

0.02
0

0.01

–0.05
0

–0.01 –0.1
0 10 20 30 40 0 5 10
Step Step

Fig. 1 Impulse-response graphs for two groups of variables. SSE, social security expenditure; URIG, urban–rural income gap;
H2, represents rural poverty headcount ratio of 2000–2010.
 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067
RPHR and fiscal SSE were observed, it is found from Fig. 1
that lnH2 began to respond in the second phase after it was
impacted by the positive impulse of one unit of lnSSE from
2000 to 2010, which was a negative response. The third
phase continued the trend, but the response was relatively
weak and gradually stabilized. Hence, on the whole, the
fiscal SSE has a negative impact on H2 in the study period,
but due to the short time series, the impact is not as obvious
as that of the first model.
Variance decomposition is to evaluate further the
importance of different structural impacts on the change of
endogenous variables. In this paper, the results of variance
decomposition of URIG and RPHR (Table 4) show that these
two variables have greater contributions themselves, with
100% contributions in steps 1 and 2. With each increase
of step, the contribution began to decline, and URIG
decreased very slightly. By step 10, the contribution was
still about 99%. The contribution rate of self-change of H2
representing RPHR of 2000–2010 has decreased since
step 3, but the decrease after that is relatively weak, which
is about 70% in step 9. It can be seen that nearly 99% of
the changes in URIG come from its contributions, while
the contribution of SSE to the changes is only 1%. Nearly
70% of the changes in RPHR from 2000 to 2010 are caused
by its own changes, and the contribution rate of SSE to its
changes is 30%.
3. Results
3.1. Relationship between URIG and SSE
First, the result of the empirical analysis shows that
SSE has increased URIG during the study period. The
cointegration equation demonstrates that the long-term
elasticity of URIG to fiscal SSE is 0.052; that is, for every
1% increase in SSE, URIG will increase by 0.052%.
Therefore, SSE increases the gap of wealth between urban
and rural residents during the study period. Second, while
the urban–rural income inequality is increasing, the ECM
Table 4 Result of variance decomposition
Urban–rural income gap Social security expenditure
Step
(URIG) (SSE)
1 100 0 100
2 100 0 100
3 99.8972 0.1028
4 99.8972 0.1028
5 99.6819 0.3181
6 99.6819 0.3181
7 99.3815 0.6185
8 99.3815 0.6185
9 99.0240 0.9760
10 99.0240 0.9760
1065
correction term in the error correction model can correct
the non-equilibrium state caused by short-term fluctuations.
The adjustment strength is 0.6005, and the coefficient is
negative, which indicates that the cointegration relationship
offsets URIG.
3.2. Relationship between RPHR and SSE
Since RPHR under the new poverty line was not passing
the unit root test, the cointegration analysis on rural poverty
headcount and social security expenditure cannot be done.
However, we conducted the cointegration analysis on the
correlation of RPHR measured by the old poverty line
covering 2000 to 2010, and SSE in the same period due to
H2’s passing the stationarity test. The result shows that at
the 10% significance level, there is a certain cointegration
relationship between SSE and RPHR. The cointegration
equation shows that the long-term elasticity of the RPHR
to SSE is –0.3126; that is, RPHR will decrease by 0.3126%
for every 1% increase in SSE. Therefore, SSE will play a
preferable role in promoting the reduction of RPHR in the
study period. The error correction model results show that
when short-term fluctuations deviate from the equilibrium
state, the ECM correction term can pull it back to the
equilibrium state with an adjustment strength of –1.0822.
The coefficient is negative, indicating that the cointegration
relationship has a negative effect on the incidence of poverty.
4. Discussion
According to the analysis results of impulse response
function and variance decomposition, after URIG is shocked
by a positive impulse of SSE, its response is positive, which
further confirms that SSE has indeed widened URIG, but
its impact is weak. This result is consistent with research
that China’s social security expenditure had an adverse
influence in reducing income inequality from 1993 to 2014,
but the negative effect shrank after 2007 (Yang and Shen
2016). The evidence from Zhu (2017) also proves that social
Rural poverty headcount ratio Social security expenditure
(RPHR) (SSE)
0
0
71.9904 28.0096
71.9904 28.0096
70.5055 29.4945
70.5055 29.4945
70.5001 29.4999
70.5001 29.4999
70.4979 29.5021
70.4979 29.5021
1066 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067
security expenditure in China has increased the income
gap between urban and rural residents between 1982 and
2016. The change of URIG is mainly due to the variation in
the income and income structure, and the impact of SSE on
the change is only 1%. Taking the income gap from 2013 to
2018 as an example, URIG was 2.8 to 2.69 with a very slight
decrease. The public social security expenditure had a very
weak impact on urban and rural residents’ income gap. The
statistical results show that less of SSE was spent in rural
areas than urban areas, and the proportion was only 11.0%
in 2002 (Tao 2002; Liu 2004) due to the urban–rural dual
structure. The proportion of pension to retired people from
administrative units to the total social security expenditure
was 31.6% in 2018, which means the largest social security
expenditure was caught by the urban people (MOF 2019).
Another reason was that there was a big gap between urban
and rural areas in some social security projects’ payment
standards. For example, the monthly payment level of the
the Chinese Dibao program for urban residents was 579.7
CNY (85.3 USD), while it was 402.8 CNY (59.2 USD) in
rural areas by the end of 2018. Fig. 2 shows that there is a
converging trend for two lines indicating different payment
levels in study period but the disparity still exists.
Similarly, the results show that the RPHR in this period
began with a negative response in the third phase after
being shocked by a positive impulse of one unit of SSE
and gradually tended to be stable. It means that SSE in
this period has promoted the alleviation of rural poverty.
Nearly 70% of the changes in RPHR are caused by its own
changes, and the contribution rate of SSE to the changes
is 30%. The reason is that during this period, the following
social security policies had a positive impact on poverty
reduction in rural areas: In 2003, the government launched
the pilot work of the New Rural Cooperative Medical System,
which would achieve full coverage by 2008. In 2007, the
Chinese Dibao program targeting vulnerable rural people
700
CNY per capita per mon
600
500
400
287.6
300 205.3 227.8 251.2
200
100
143.2
82.3 100.8 117
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Fig. 2 The Chinese minimum living allowance for low-income groups in urban and rural areas. Data resource: Statistical Bulletin
on Social Service Development (MCAC 2018).
was implemented in rural areas and gradually replaced
the existing assistance system for the low-income families.
The statistical data from NBSC show that the percentage
of transfer income to per capita net income in rural areas
increased from 3.6% in 2003 to 8.2% in 2012, which was
helpful to alleviate rural poverty in this period.
5. Conclusion
This paper constructs the cointegration analysis between
SSE and URIG, and SSE and RPHR, to evaluate social
security’s effect on the relief of social inequality. The ECM
results show that the long-term elasticity of URIG to SSE
is 0.0513. The elasticity of the RPHR to SSE is –0.2255,
which indicates SSE increases the urban–rural income gap
in the study period but promotes rural poverty reduction.
The Chinese government converges the payment level of
some social welfare policies for urban and rural residents,
such as basic medical insurance and endowment insurance.
Yet, the gap of social security between urban and rural
residents in terms of pension, health care security, and
the minimum living allowance still exists. According to the
European Union’s SSE statistics, China’s SSE level was
787.51 billion CNY in 2015, accounting for 11.5% of GDP.
The government’s spending accounted for 37.9% of SSE
while the SSE of the EU in 2014 was 401.91 billion euros,
accounting for around 28% of GDP and the government’s
spending accounted for about 51% of SSE. The comparison
shows that China’s SSE level is lower than that of the EU as
a whole. The policy objective of the social security system
has not been realized, as this study proves.
To conclude, much social security expenditure and a more
equitable social security system should be encouraged. It
would become one of the major anti-poverty strategies after
2020 when we win the battle against absolute poverty. First,
it is critical to increase the proportion of SSE in financial
Urban Rural
579.7
540.6
494.6
451.1
411
362
330.1
402.8
358.4
312
264.8
231.4
202.8
172.3
 YU Le-rong et al. Journal of Integrative Agriculture 2021, 20(4): 1060–1067
expenditure, optimize SSE structure, and give full play to the
function of social security. Second, further bridging the gap
of social security like pension, the minimum living allowance,
and health care between urban and rural residents is also
a policy direction for alleviating relative poverty after 2020.
Acknowledgements
This research work was financially supported by the
National Social Science Fund of China (16ZDA021) and
the Humanities and Social Sciences Research Fund of the
Ministry of Education of China (18YJA630135). We thank
two anonymous reviewers for their useful comments.
Declaration of competing interest
The authors declare that they have no conflict of interest.
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