# Heterogeneous Effects of Income on Physical and Mental Health of the Elderly: A Regression Discontinuity Design Based on China’s New Rural Pension Scheme

## TL;DR

This study examines how pension income affects the physical and mental health of elderly people in China, finding that it helps physically but harms mentally, especially when combined with good community medical care.

## Contribution

The study introduces a novel regression discontinuity design using China’s New Rural Pension Scheme to analyze health outcomes and their interaction with community medical environments.

## Key findings

- Pension income improves physical health but worsens mental health among the elderly.
- The physical health benefit is stronger in communities with better medical environments.
- Mental health decline is not influenced by the quality of the external medical environment.

## Abstract

Aging has been a social phenomenon unprecedented in history, which poses greater challenges on ensuring the health of the growing old population. We aim to estimate the effects of pension income on the physical and mental health of the elderly and further explore the complementary effects of external community medical environments with external pension income. We develop a Regression Discontinuity Design using an exogenous shock to the income—China’s New Rural Pension Scheme (NRPS), the world’s largest existing pension scheme. We find that public pension policy provides financial support to the elderly but also increases the loss of their perceived controllability. Specifically, empirical results indicate that pension income plays a positive effect on physical health and a negative effect on mental health. The positive effect only exists when communities have better medical environments, while the negative relationship is not affected by the external medical environment. Our findings reveal that internal pension income and external medical environment are therefore complementary factors to achieve better physical health of the elderly, while passive dependence on pension income may reduce mental health by heightening older people’s negative perceptions of losing controllability of their lives. Money is not omnipotent in both the physical and mental health of the elderly.