In China, the employment rate among middle-aged and older urban residents is exceptionally low. For example, 27 per cent of 55-64 year old urban women were in work in 2013, compared to more than 50 per cent in UK, Thailand and Philippines. This paper investigates potential explanations of this low level of employment in urban China. [The author documents] the stylized fact that a majority of individuals stop working as soon as they qualify for a public pension, which most often happens at age 50 for women. [The author also highlights] the presence of significant amounts of financial and...  [+] Show more

In China, the employment rate among middle-aged and older urban residents is exceptionally low. For example, 27 per cent of 55-64 year old urban women were in work in 2013, compared to more than 50 per cent in UK, Thailand and Philippines. This paper investigates potential explanations of this low level of employment in urban China. [The author documents] the stylized fact that a majority of individuals stop working as soon as they qualify for a public pension, which most often happens at age 50 for women. [The author also highlights] the presence of significant amounts of financial and time transfers between generations. [The author provides] descriptive evidence that transfers from children are responsive to parental incomes, and that mother's labour supply is affected by the expectation of transfers from her children. [The author then built] and calibrated a life-cycle model of labour supply and saving. [The author finds] that both the pension system and transfers from children have large effects on female labour supply. Increasing the female pension age from the status-quo to 60 would raise the employment rate of 50-59 year old women by 28 percentage points.

Published abstract.