Effect of Retirement on Work Hours: Evidence From China

This study investigated the causal effect of retirement on the labor supply. We used male workers in China as an example and selected work hours as a measure of labor supply. The study employed two methods, namely fuzzy regression discontinuity and two-stage least squares, to analyze the impact of retirement on the work hours of the older adults based on data from the China Health and Retirement Longitudinal Study in 2015. Results show that retirement did not significantly reduce the labor supply. However, its impact on the supply of different types of labor was inconsistent. We also found that retired old adults tended to allocate more work hours to self-employment. Policy implications are as following. There’s room for increasing retirement age, but it may not be as effective as expected in increasing the level of labor supply. If a delay retirement policy is to be implemented, we should pay attention to the side effects on the normal replacement of labor in the job market and maintaining a reasonable turnover rate by implementing a flexible retirement system. Moreover, establishing a good job market environment for older adults as well as a mechanism and system for retired older adults with high human capital accumulation to return to the labor market are also recommended to increase the productivity level of the labor force.