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Does Formal Sector Impact the Elderly Labor Supply? A study based on China Family Panel Studies
Jie Chen1 ,
Xiaoxuan Li1 ,
Chen Wen2 ,
Linxiang Ye1
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1
School of Economics, Nanjing University of Finance & Economics;Nanjing,
China
2
School of Finance, Nanjing University of Finance & Economics;Nanjing,
China
© Invalid date by the Author(s). This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution 4.0 International License ( https://creativecommons.org/licenses/by/4.0/ )
Abstract
Using data from China Family Panel Studies, this study examines the impact of the sector in which individuals work on their labor supply after retirement. Our findings show that the work sector has a significant impact on labor supply after retirement. Using the linear probability, probit, and instrumental regression models, the results support that individuals working in the formal sector pre-retirement are less likely to stay in the labor market than those working in the informal sector. The mechanism analysis shows that a wage gap is evident between the formal and informal sectors before retirement, which becomes narrower after retirement. This is because it is difficult for individuals in the formal sector to stay in place after retirement, resulting in a rapid wage decline. Because of the substitution effect produced by the decline in wage income, it appears that individuals working in the formal sector before retirement are reluctant to stay in the labor market after reaching retirement age. Moreover, the elderly working in the formal sector usually receive higher pensions after retirement, and this income effect reduces the elderly's participation in the labor market after retirement.
Keywords
labor supply; the formal sector; the pensions
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