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Impact of the New Rural Pension Scheme on Labor Supply

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Economic Transition and Labor Market Reform in China

Abstract

To address the social and economic problems caused by the aging population, many governments around the world sought to establish a set of social security systems (e.g. a Universal Public Pension Scheme) to provide security for the elderly group. However, it is pointed out that the public pension may reduce the labor supply, therefore a public pension scheme may negatively affect economic growth in the long term based on the empirical studies for the developed countries. Chinese government implemented a public pension (New Rural Pension Scheme: NRPS) in 2009 for the rural residents. Does the NRPS affect the labor participation of elderly in rural China? Chapter 9 employs an empirical study to provide the evidence on the issue. It is found that the NRPS may decrease the labor participation of the rural elderly. With the aging population problem becoming severe in China, it is thought that the labor supply shortage will become more serious in the future. Therefore when Chinese government promotes the public pension system reform, both the welfare effect and the influence of the pension on the labor market for the elderly group should be considered.

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Notes

  1. 1.

    In China, from the lowest level to the highest level, the hierarchy of government is the village government, township government, county government, municipal government, provincial government, and central government.

  2. 2.

    For developed countries, most previous studies indicate that the pension reduces the elderly labor supply and increases the probability of retirement. In other words, to decrease the pension benefit and to delay the pension receipt can increase the elderly labor supply. Please refer to Krueger and Pischke (1992), Samwick (1998), Blau and Goodstein (2010), and Vere (2011) for the U.S.; Oshi et al. (2009) and Shimizutani and Oshio (2013) for Japan; Kudrna and Woodland (2011) for Australia; Maloney (2000) for New Zealand; Martin and Marcos (2010) for Spain; Hernaes et al. (2016) for Norway; and Borsch-Supan (2000) for Germany.

  3. 3.

    Ardington, Case, and Hosegood (2009) explained the reason for the results as being that the pension’s impact is attributable to the increase in household resources it represents, which can be used to support migrants until they become self-sufficient, and to the presence of pensioners who can care for small children, which allows prime-aged adults to look for work elsewhere.

  4. 4.

    Juarez (2010) explained the reason for the results as the income in the hands of elderly women being shared more with younger family members than income in the hands of elderly men.

  5. 5.

    Based on the questionnaire, the worker who works for another person or enterprise as permanent employee is a regular worker; the worker who is a contractor with other people or enterprise or a temporary worker is an irregular worker; the worker who is self-employed, the owner-manager with employees, self-employed, independent operator with no employees, the paid family worker, or the unpaid family worker is the self-employed; the one who is not working in the survey year is a non-working one.

  6. 6.

    Because the missing values for the subjective health status are more, the mental health score is used in this analysis. The health status is poor when the mental health score is higher. The analyses use the subjective health status variable and the results are similar to the mental health score. To maintain the observations in econometric analysis, the results use the mental health score variables present in Sect. 9.6.

  7. 7.

    Here, labor force participation rate is the proportion of workers in the total population by age groups.

  8. 8.

    Here, the LFPR gap is calculated by the equation as “LFPR of pension receipt group-LFPR of no-pension receipt group”.

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Authors and Affiliations

  1. Hitotsubashi University, Tokyo, Japan

    Xinxin Ma

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Ma, X. (2018). Impact of the New Rural Pension Scheme on Labor Supply. In: Economic Transition and Labor Market Reform in China. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-1987-7_9

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  • DOI: https://doi.org/10.1007/978-981-13-1987-7_9

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  • Print ISBN: 978-981-13-1986-0

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