Does pension affect labour supply? New evidence from large-scale rural pension policy reform in China

Abstract

ABSTRACT Using national longitudinal survey data, we study how the Chinese New Rural Pension Scheme (NRPS) reform affects the rural labour supply structure of individuals aged 20–70. Applying multiple regression approaches, we find NRPS does not significantly affect Chinese rural residents’ weekly working hours, labour force participation, or migration choices; only those aged 50–59 change their labour supply pattern after joining the pension system. Parental pensions motivate adult children to migrate out only when both parents receive pensions. Various factors are explored to understand our findings; the low subsidy that Chinese rural pensioners currently receive is the major factor. These results indicate that from the perspective of improving the welfare of the rural elderly and encouraging the more free flow of young rural labour force, it is necessary to increase the compensation level of NRPS.