The Minimum Living Standard Assistance and Family Expenditures in Urban China

Qin Gao, Fordham University
Fuhua Zhai, New York University

The Minimum Living Standard Assistance (MLSA) policy has been established in urban China since 1999 to serve as a last-resort safety net for poor families, especially those with laid-off members. The eligibility rules, benefit generosity, and administrative procedures vary substantially according to city socioeconomic development and financial capacity. Using data from the China Household Income Project 2002 urban sample, we examine how MLSA has affected family expenditures—an important but understudied aspect of family economic well-being. We study family expenditures in ten major categories – housing and utilities; food; alcohol and tobacco; clothing; health; transportation; education; leisure; personal care; and miscellaneous. We further investigate whether MLSA increases family members’ working efforts by examining some work-related expenses such as expenditures on food away from home, adults’ clothing, and transportation. Instrumental variable models and propensity score matching methods are used to examine the effects of MLSA generosity and participation on family expenditures.