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The relationship between elderly employment and youth employment: evidence from China

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  • Zhang, Chuanchuan

Abstract

Retirement system reforms such as postponing retirement age in law are needed in China because of its rapid population aging. The overquick aging will result in both shortage of labor force supply and incubus of the social security system. The Chinese government acknowledged the negative influences of population aging, but finally decided to maintain the retirement age in law unchanged. The reason, as claimed by the policy makers and many socio-economic scholars, is postponing retirement age in law in China will crowd out youth employment. Unfortunately, no empirical evidences are provided, although the claim is critical to the potential retirement system reform. In this paper, we firstly address the validity of this claim. Using micro data from China’s 1990 and 2000 census and the 2005 1% population sample survey, we provide the first piece of evidence on the relationship between elderly employment and youth employment in China. Our OLS estimation results suggest that employment rates of younger persons are positively rather than negatively associated with employment rate of older persons. We further tried to identify a causal relationship by using two-way fixed effects and TSLS estimation strategies and found results consistent with our OLS estimation. Finally, we examine whether employment of older persons hurts the youth at the intensive margin by estimating the impact of elderly employment on younger workers’ monthly wage and still found a positive rather than negative effect. In short, the claim that postponing the retirement age will hurt the youth cannot be supported by empirical evidence. Although our empirical results are tentative, we view this paper as an important try to provide the first piece of evidence on the potential impact of retirement reform on youth employment and as suggesting further empirical studies on the claim that postponing retirement age will hurt the youth.

Suggested Citation

  • Zhang, Chuanchuan, 2012. "The relationship between elderly employment and youth employment: evidence from China," MPRA Paper 37221, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37221
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    File URL: https://mpra.ub.uni-muenchen.de/37221/1/MPRA_paper_37221.pdf
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    References listed on IDEAS

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    1. Jonathan Gruber & Kevin Milligan & David A. Wise, 2009. "Social Security Programs and Retirement Around the World: The Relationship to Youth Employment, Introduction and Summary," NBER Working Papers 14647, National Bureau of Economic Research, Inc.
    2. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
    3. Kapteyn, Arie & Kalwij, Adriaan & Zaidi, Asghar, 2004. "The myth of worksharing," Labour Economics, Elsevier, vol. 11(3), pages 293-313, June.
    4. Adriaan Kalwij & Arie Kapteyn & Klaas de Vos, 2009. "Early retirement and employment of the young," Working Papers 200948, Geary Institute, University College Dublin.
    5. Hebbink, G. E., 1993. "Production factor substitution and employment by age group," Economic Modelling, Elsevier, vol. 10(3), pages 217-224, July.
    6. Tom Walker, 2007. "Why economists dislike a lump of labor," Review of Social Economy, Taylor & Francis Journals, vol. 65(3), pages 279-291.
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    Cited by:

    1. Ayako Kondo, 2016. "Effects of increased elderly employment on other workers’ employment and elderly’s earnings in Japan," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-23, December.
    2. René Böheim, 2014. "The effect of early retirement schemes on youth employment," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-70, June.
    3. Waikei R Lam & Xiaoguang Liu & Alfred Schipke, 2015. "China’s Labor Market in the “New Normal”," IMF Working Papers 15/151, International Monetary Fund.
    4. Рубинштейн Александр Яковлевич, "undated". "Рациональность & Иррациональность: Эволюция Смыслов
      [Rationality & Irrationality: Evolution of the Senses]
      ," Working papers a:pru175:ye:2017:1, Institute of Economics.
    5. repec:nea:journl:y:2017:i:33:p:117-140 is not listed on IDEAS

    More about this item

    Keywords

    Retirement Reform; Elderly Employment; Youth Employment;

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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