Impact of the New Rural Pension Scheme on Labor Supply

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.