The causal effect of public pensions on the mental wellbeing of the elderly in lower and middle-income countries deserves further investigation. This paper first constructed a theoretical framework for the impact of New Rural Society Pension Insurance pensions in China on the mental wellbeing of the rural elderly, and described potential channels through which pension income may affect mental wellbeing. We then used the fixed effect model and the instrument variable approach to estimate the casual effects of pension income on the mental wellbeing of the rural elderly. The results reveal that pension income improves mental wellbeing by relieving depression of the rural elderly; however, the beneficial effects of pension income are very limited. Pension income has no beneficial effects on the mental health of the rural elderly in the east region, whereas it slightly relieves depression of those in the middle and west regions. We also found that pension income produces small improvements in the mental health of older females, elderly persons living independently, and those with relatively poor economic conditions.
Do Public Pensions Improve Mental Wellbeing? Evidence from the New Rural Society Pension Insurance Program