Does New Rural Pension Scheme decrease elderly labor supply? Evidence from CHARLS

- We study the effect of the New Rural Pension Scheme on the elderly labor supply.
- Pension from the NRPS program may not induce the elderly to withdraw from the labor market.
- The NRPS program may not improve the welfare of the elders with illness.

This paper examines the effect of the New Rural Pension Scheme (NRPS) on the labor supply behavior of the elderly in rural China. Using pooled data from two waves of the China Health and Retirement Longitudinal Survey (CHARLS) and an analytical framework of combination of regression discontinuity design and difference in difference method (RD-DiD), we find no evidence that pension receipt from the NRPS program does significantly induce the elderly to withdraw from the labor market. The heterogeneous effects by health status indicate that pension recipient slightly decreases the probability of labor force participation for those individuals with chronic diseases; however, the effect is not statistically significant. The empirical findings suggest that the introduction of the NRPS program does not improve the welfare effect of the originally targeted elder individuals with illness.