Public assistance and poverty reduction: The case of Shanghai

Abstract

Using household survey data collected during November 2009 to January 2010 among 500 low-income families in Shanghai, this article provides updated evidence on the poverty reduction effects of the Minimum Living Standard Assurance (MLSA, or Dibao), urban China’s primary public assistance program. The article finds that, even though Shanghai’s MLSA line has been constantly raised, it has trailed behind the average living standard in Shanghai as measured by city per capita income and consumption levels. Low education, unemployment, being unmarried, and having child(ren) have been revealed to be strongly linked to MLSA participation and higher benefit amounts. MLSA’s poverty reduction effects were most prominent when a low poverty line was used, and the effect size became smaller as the level of the poverty line rose. When using two absolute poverty lines that were set in the national context, MLSA lowered the poverty rate, gap, and severity in Shanghai significantly but was unable to eliminate poverty. When using two much higher relative poverty lines, it is evident that MLSA was far from sufficient in lifting the relative positions of the recipient families in the context of the overall income distribution in Shanghai.