Institutional Dispersion: Have Government Subsidies Reduced Pension Inequality in China?

Abstract

Fiscal transfers are central to reducing inequality in multi-level pension systems, but their redistributive impact depends on how they are filtered through existing governance structures. Drawing on national data from 1998 to 2022, this study examines how central subsidies to basic pensions are allocated and whether they achieve equalization in a large, decentralized system. The analysis finds that substantial increases in central support have produced only modest reductions in intergroup and interprovincial inequality. Transfers continue to reinforce the institutional priority given to schemes serving formal employees, and provinces with stronger fiscal capacity remain better positioned to sustain higher levels of pension support. To explain these patterns, the study develops institutional dispersion, a concept capturing how authority configurations, fiscal asymmetries, and administrative capability shape subsidy outcomes. The findings show that redistributive impact depends less on transfer volume than on the institutional channels through which funds move, indicating the need for stronger coordination and targeted administrative support.