Researchers led by Yong Xie, Junfeng Xiang, Fang Li, and Suyan Shen of Nanjing Agricultural University analyzed data from the China Family Panel Studies (CFPS), a nationally representative longitudinal survey conducted by Peking University. Drawing on four waves of data collected between 2016 and 2022, the team assembled a sample of 9,678 retirees—5,513 from the private sector and 4,165 from the public sector—who had retired after 1997 and received monthly pensions. Because the reform was announced and implemented by the government as a nationwide policy, individuals had no influence over it, allowing the researchers to treat the ten-year transitional period as a quasi-natural experiment.

The methodological core of the study was a difference-in-differences (DID) design. Retired private-sector employees served as the treatment group, while retired public-sector employees formed the comparison group. Subjective well-being was measured using the eight-item Center for Epidemiologic Studies Depression (CES-D8) scale, a widely validated instrument administered in the CFPS that captures the frequency of psychological experiences over the past week. Scores range from 8 to 32, with lower scores indicating higher subjective well-being. The researchers also controlled for a comprehensive set of individual and household characteristics, including age, gender, education, health status, marital status, health insurance enrollment, household income, and housing conditions.

The results were striking. The reform was associated with a reduction of 0.663 units on the CES-D depression scale among private-sector retirees, a statistically significant effect at the 5 percent level that also carried economic meaning given the scale’s range. Event-study analyses confirmed the parallel trends assumption: before the reform, there were no systematic differences in depression scores between the two groups, but as the transition progressed, scores for private-sector retirees fell steadily. A placebo test that randomly reassigned treatment status and policy timing 1,000 times produced estimates clustered around zero, confirming that the observed effect could not be attributed to unobserved confounders. The findings also survived robustness checks that replaced the dependent variable with a binary depressive-tendency indicator, added controls for intergenerational support and internet use, and excluded data from the COVID-19 pandemic period, when elderly well-being declined sharply.

Crucially, the study went beyond documenting an effect to explain how it operated, applying the ‘income-happiness’ framework from happiness economics. Two mechanisms emerged. The first was the absolute income effect: the reform guaranteed private-sector retirees annual pension increases of no less than 5 percent, funded by the expanded pooled fund and fiscal transfers. Because income improvements yield the largest well-being gains at the lower end of the distribution—a nonlinear relationship long established since Richard Easterlin’s foundational work—these increases translated into substantial psychological benefits for a group whose pre-reform replacement rates were generally low.

The second mechanism was the relative income effect, which the researchers quantified using a relative deprivation index computed within provincial subgroups. Before the reform, private-sector retirees experienced pronounced relative deprivation compared with their public-sector counterparts, even when their pensions covered basic needs. The reform constrained disproportionate growth in public-sector benefits through compensatory transitional pensions, narrowing the gap and reducing the institutional source of relative deprivation. Regression analysis confirmed that absolute pension income rose significantly while relative pension deprivation fell, grounding both theoretical channels in micro-level data. This dual mechanism is theoretically significant because it shows that the famous Easterlin Paradox—falling happiness amid rising incomes—can be partially reversed by improving the relative distributional position of disadvantaged groups, without any change in aggregate growth rates.

The heterogeneity analysis added a distributional dimension with important policy implications. The reform’s well-being effects were statistically significant in rural areas but not in urban ones, and significant in China’s less developed central and western regions but not in the wealthier east. The pattern makes intuitive sense: where the pre-reform pension gap was widest and perceptions of institutional unfairness most acute, unifying pension design delivered the largest reductions in relative deprivation. This mirrors findings from parallel integration reforms in China’s medical insurance systems, suggesting a broader regularity—equity-oriented structural reforms tend to concentrate their gains on the most disadvantaged populations.

The study’s contribution is distinctive in the international literature. Previous research on pensions and well-being—in South Africa, Mexico, and South Korea—has largely treated pension policy as an external income transfer, examining benefit expansions or non-contributory schemes. China’s 2014 reform was different: its primary stated objective was to eliminate institutional segmentation between sectors, making it a rare natural experiment in equity-motivated integration. By the end of 2022, roughly 115 million retirees were enrolled in the private-sector scheme compared with about 21 million under the public-sector scheme, meaning the reform touched the vast majority of urban employee pension recipients. With individuals aged 65 and above comprising 15.6 percent of China’s population by the end of 2024, the stakes of such reforms extend far beyond economics.

Notably, the well-being gains emerged during a period when objective convergence was still incomplete. Other researchers have found that the reform has not fundamentally eliminated the pension gap and that formal equality has yet to translate into substantive equality. Yet this study demonstrates that even partial structural unification generated substantial and statistically robust psychological improvements among the group it was designed to help. Objective equity and subjective equity, the authors argue, are related but distinct policy goals—and the structural design of pension reform carries independent welfare significance beyond benefit levels alone.

The findings carry lessons well beyond China. Many developed countries, including the United States and the United Kingdom, have long maintained separate pension systems for public and private sector employees, typically with more generous public-sector benefits, and numerous developing countries still face similar fragmentation without having initiated integration. China’s experience—culminating in the reform’s completion on September 30, 2024, when eligibility criteria were standardized under a combined employer-employee contribution model—suggests that equity-oriented integration can produce meaningful well-being improvements within a relatively short transitional window, with the strongest effects among rural and less-developed populations. The authors acknowledge limitations: the data fall entirely within the transitional period, the design cannot assess whether public-sector retirees experienced offsetting well-being costs as their advantage narrowed, and direct measures of fairness perceptions were unavailable in the CFPS. Still, for policymakers weighing the social value of unifying fragmented pension systems, the evidence offers a compelling conclusion: repairing institutionally entrenched relative deprivation may be one of the most powerful happiness policies a government can pursue.

Subject of Research: The effects of China's public pension integration reform on retirees' subjective well-being

Article Title: The Subjective Well-being Effects of Public Pension Integration Reform: Evidence from China

Article References: Xie, Y., Xiang, J., Li, F., & Shen, S. (2026). The Subjective Well-being Effects of Public Pension Integration Reform: Evidence from China. Social Indicators Research, 184(2), Article 40. https://doi.org/10.1007/s11205-026-03933-6

Image Credits: AI Generated

DOI: 10.1007/s11205-026-03933-6

Keywords: subjective well-being, public pension, integration reform, China, retirees, relative income, absolute income, Easterlin Paradox, difference-in-differences, CES-D scale, pension gap, institutional fairness