Working longer or working harder? Subjective survival expectations and labor supply in China

We investigate the impact of subjective survival expectations on individuals’ labor supply at the extensive and intensive margins in China. Using data from four waves of the China Health and Retirement Longitudinal Study we find: Subjective survival expectations are formed rationally. Individuals with greater survival expectations have higher labor supply, because the perception of longevity risk motivates them to prepare financially for old age. Such an effect varies across groups with different status of household registration. Labor supply adjustment occurs in both labor participation and weekly hours worked among rural workers, whereas it is reflected only in hours worked among urban workers. This is consistent with the proposed selection mechanism whereby the constraints of the mandatory retirement policy induce a restrictive choice regarding labor supply among those still working in the public sector when faced with longevity risk. Our findings contribute to a better understanding of the differential labor supply responses to the fact of aging under institutional constraints and provide important policy implications for future retirement policy reforms.