By Yi Chen (Jinan University – Institute for Economic and Social Research) & Xiaoyun Zhang (University of New South Wales (UNSW) – ARC Centre of Excellence in Population Ageing Research (CEPAR))

This paper analyzes the effect of parental retirement on the next generation through intergenerational time transfer. We investigate a series of consequences, including women’s time allocation, fertility decisions, labor force participation, and subjective well-being. The study uses data from the China Family Panel Studies (CFPS) and employs regression discontinuity estimation to account for the potential endogeneity in mothers’ retirement decisions. The mandatory retirement age (50 for blue-collar women) in China is used as an exogenous variation of retirement decisions. The results show that maternal retirement decreases women’s childcare time by eight hours per week. At the same time, the retirement of mothers/in-law significantly increases the employment rate of women with children by 12%. Women are also more likely to give birth around their mother’s retirement age. This paper contributes new findings to the literature on the intergenerational effects of retirement and provides important evidence of the intergenerational consequences of pension reforms that delay retirement in China. The effects are expected to be larger in the coming years as a result of the two-child policy implemented in 2016. The results suggest that childcare services need to be improved and developed if the government wants to increase female labor force participation.

Source: SSRN