Examining the Impact of Taiwan’s Cash Allowance Program on Private Households

SummaryTo fill the gap of crowding-out literature in Asia, this study analyzes the crowding-out impact of Taiwan’s public old-age allowances on familial transfers to poor parents. Using government data during 1990–2003, we estimate that 1$ of public transfers displaces 30–50 cents of inter-household transfers. One explanation is that the old parents in this analysis were from poor families and they reacted strongly to allowances. However, the overall consumption, especially in luxury goods, of the poor individuals has substantially increased. This finding indicates that Taiwan’s old-age allowance program does improve the welfare of older individuals.