Labor supply, health, and informal caregiving of the elderly




Li, Molin, Ph. D.

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This dissertation explores the determinants of the labor supply, physical and mental health, and informal care provision for the elderly.

The first chapter provides new evidence on the long-term consequences of exposure to policy-driven fertility restrictions during younger reproductive ages on labor supply in parents’ middle and late adulthood. I focus on the implementation of the “Later, Longer, Fewer (LLF)” campaign, a policy with strict enforcement of a series of fertility restrictions to mandatorily limit couples to have at most three children, which rolled out across provinces between 1970 and 1975 in China. I study the causal effect of exposure to fertility restriction using a difference-in-difference specification and exploiting the geographical variation in the LLF implementation years. I find that exposure to the LLF significantly delays marriage and reduces lifetime fertility. For the labor supply outcomes, I find that complete exposure to this nine-year stringent quantity-control population policy increases the labor force participation by 14.4 percent almost 40 years after the LLF period when the parental generation enters middle and late adulthood. Investigating mechanisms, I show that the amount of LLF-induced increase in elderly labor income (1,307 RMB from an extra year of exposure to the LLF) is almost equivalent to the amount of LLF-induced reduction in other primary income sources of old-age support such as savings, pension income, and intergenerational transfers (1,300 RMB from an extra year of exposure to the LLF). It suggests that exposure to the LLF at younger reproductive age leads to a greater pressure to finance old-age consumption. This lack of old-age financial support is a primary channel linking the LLF exposure to the higher elderly labor supply.

My second chapter investigates whether job displacement has a causal effect on the health of displaced individuals and their family members. I focus on people who were displaced involuntarily due to business closure. Using the Survey of Health, Aging and Retirement in Europe, I show that job loss has a negative causal effect on measures of physical and mental health. This effect is most negative in Southern European countries, but such a negative impact does not exist in Northern Europe. I find no spillover effect on the health of the displaced worker's spouse and parents.

The last chapter studies the effects of the social pension expansion on informal caregiving. Using a regression discontinuity design based on the introduction and expansion of China’s New Rural Pension Scheme (NRPS), I find that the probability of being an informal caregiver increases by 11 percent at the non-contributory pension eligible age cutoff, while there is no significant effect on the demand of informal care. I also observe rural women significantly drop off from the labor market at the NRPS cutoff, which suggests that time reallocation might explain the jump in informal care provision.



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