Scandinavian Working Papers in Economics

Lund Papers in Economic History,
Lund University, Department of Economic History

No 139: Labor Supply Responses to New Rural Pension Insurances in China: A Regression Discontinuity Approach

Zeyuan Chen (), Tommy Bengtsson () and Jonas Helgertz ()
Additional contact information
Zeyuan Chen: Department of Economic History, Lund University, Postal: Department of Economic History, Lund University, Box 7083, S-220 07 Lund, Sweden
Tommy Bengtsson: Department of Economic History, Lund University, Postal: Department of Economic History, Lund University, Box 7083, S-220 07 Lund, Sweden
Jonas Helgertz: Department of Economic History, Lund University, Postal: Department of Economic History, Lund University, Box 7083, S-220 07 Lund, Sweden

Abstract: Transitioning into retirement is an under-researched phenomenon in developing countries. Largely, this is linked to a predominance of contexts where – in particular – the rural population remains outside the coverage of any formal pension system. In 2008, China introduced the New Rural Social Pension (NRSP), a program which by now covers the majority of the Chinese rural elderly. This paper examines the effects of the NRSP on the labor supply of the elderly in rural China. As pension benefit eligibility at the time of its implementation is conditional on age, a regression discontinuity design is applied to investigate the casual effect of the receipt of pension benefits on labor supply. Furthermore, as the NRSP is neither means-tested nor conditions on retirement, it induces a pure income effect on employment. Using data from the China Health and Retirement Longitudinal Study, a nationally representative data set, we find that the receipt of pension benefits increases the probability of retirement among the rural elderly by around 15%.

Keywords: China; New Rural Social Pension; Labor supply; Regression discontinuity; Retirement

JEL-codes: H55; J26

40 pages, October 20, 2015

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