Long-term consequences of fertility on elderly labor supply

Abstract

In recent decades, the Chinese demographic structure has been shaped by two major trends: population aging and declining fertility. This study examines the long-term impact of fertility on China's elderly labor supply. The use of instrumental variable methods with data from the China Health and Retirement Longitudinal Study dataset shows that having more children reduces labor supply among the elderly, especially for disadvantaged elderly, including females, those residing in rural regions, and those with low levels of education. The negative effect mainly impacts the extensive margin of labor supply rather than the intensive margin. This study excludes co-residence with adult children and taking care of grandchildren as potential factors contributing to the negative impact on the elderly's labor supply. The rise in net transfers from children, as the number of children increases, may explain the observed negative effect. This relation between fertility and elderly labor supply has significant policy implications.