It takes a village: health and old-age support in China

How do older individuals cope with health impairments and the resulting economic losses? Exploiting longitudinal data on a nationally representative sample of Chinese adults aged 45 and older, 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 increase following a health shock. Furthermore, financial transfers from siblings, other relatives, and friends increase more than those from children. Spousal instrumental care also responds strongly to health shocks. Finally, we find that although labor supply and earned income drop considerably, non-health-related expenditures do not decline. Our results suggest that households are able to cope with some of the adverse economic impacts of health shocks by counting on support networks that extend beyond their children and grandchildren. This is particularly relevant in the context of shrinking family sizes resulting from stringent family planning policies.