Rely on children or work longer? The impact of fertility and child gender on old-age labor supply

Abstract

In this study, we examine the impact of child quantity and gender on the labor supply of older parents in China, specifically in the context of developing countries where working until physically incapable is a widespread self-insurance strategy. Utilizing an instrumental variable approach that leverages regional family planning policy variations and firstborn child gender, we address potential endogeneity concerns in fertility and child gender composition. Our findings indicate that an additional child reduces the likelihood of parents working at post-retirement ages by 9.9 percentage points, with a more pronounced effect among rural parents and those receiving low pension benefits. Furthermore, having more sons further decreases labor supply compared to having more daughters, given the same number of children. We uncover evidence supporting the “old-age support” mechanism, wherein financial contributions and informal care from children increase, while lifetime labor supply and accumulated wealth decrease. We do not find evidence for adverse impact of fertility on parents’ health or their capacity to work. Having more children can essentially compensate the wage loss due to working less. Our results imply that policies aiming at reducing fertility might inadvertently undermine the well-being of older individuals,especially those who lack sufficient means of support, by forcing them to continue working into poor health during their old age.

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