Abstract
This paper evaluates the effect of China’s New Rural Pension Scheme (NRPS) on the retirement sustainability in forms of formal labor supply and informal labor supply in terms of care of grandchildren, using data from China Health and Retirement Longitudinal Study (CHARLS). We explore the regional differences of the NRPS effect on labor supply between the West and the other regions of China. Our analysis shows that rural Western China has a more severe problem of “ceaseless toil” compared to the rest of the country. We find that NRPS improves the “ceaseless toil” situation of the Chinese rural elderly especially in Western China. Our results suggest the need to increase the amount of NRPS payment, and to develop a region-specific pension programs in China.
Highlights
Labor supply behavior is an important factor in the sustainability of the retirement system [1,2]
We evaluated the effect of New Rural Pension Scheme (NRPS) on labor supply of the rural elderly in forms of both formal labor work in terms of agricultural practices and off-farm employment, and informal labor work in terms of the time spent caring for grandchildren
We evaluate the effect of NRPS on the retirement sustainability in terms of both informal and formal labor supply and explore the regional differences in the effects of NRPS
Summary
Labor supply behavior is an important factor in the sustainability of the retirement system [1,2]. The retirement pattern of the Chinese elderly in rural regions has been described as “ceaseless toil”, due to the fact that most elderly in rural China continue to work until they are no longer physically capable of labor [3,4,5,6]. With the aim of providing income support for the rural elderly and release them from the “ceaseless toil”, the Chinese government launched the New Rural Pension Scheme (NRPS) in 2009 and this program has covered all regions of rural China since 2012 [10]. The NRPS and URSP were further merged at the policy level of central government in 2014 and became the Government and Institution Pension (GIP) Program to provide greater social equality [11].
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