Effects Of Increasing-Retirement-Age Policy Announcement On Households' Savings Rate And Labour Supply

Although the Increasing-Retirement-Age Policy(IRAP)has not been implemented yet,which is becoming a big talking point in both common spheres and academic fields.Lots of considerations focus on its abilities and functions to mitigate the macroscopic matters caused by ageing,few have cared about the adjustment of households' behaviour at a micro level.The consumption-savings behaviour,as an important part of macroeconomics analysis,surely be affected by current retirement policy as we know it.Then they should naturally be affected by an announced IRAP through an anticipation prior to the implementation of that policy as well.By reviewing and organizing the relevant literatures,we find that the topics,methods and data of IRAP researches tend to be at the macro level,and there is a lack of micro level discussion of consumption-savings behavior.At the same time,the anticipation factors that prevail in the consumption-savings literatures are almost absent from the ex-ante policy evaluation studies for IRAP.They show that the IRAP works as a one-time change in the exogenous parameter,the economic models are set in an implicit manner which assumes that policy change is implemented instantaneously as soon as it was announced.The ex-ante anticipation is not quite often discussed in ex-post evaluation for policies either.However,vaguely and ambiguously unclear policies to be implemented may also have real economic implications,with anticipations playing as an important role.Another issue that is less considered in the literature is the impact of individual interactions in the family.That is often overlooked when using independent individuals instead of families for analysis.The mandatory retirement age for women in China is lower than that of men,but is also for females in many other countries.Through the common leisure preferences in household's collective decision-making,women retire earlier than their husbands which may reduce the labour supply of male spouses and further make social output declined.Moreover,this effect could change individual's ex-ant anticipation of IRAP thereby undermining the validity of policy which will be implemented in the future.In the reality of gender difference of the current statutory retirement age,the influence of female retirement on the labour supply of male spouses and its connection with the ex-ant anticipation of IRAP,have not been paid enough attention yet.Some relevant studies are needed.In view of the fact that the “retirement consumption puzzle” and the effect of IRAP for independent individuals have been researched more fully,this dissertation focuses on the following issues:(1)estimate the effect of IRAP announcement effect on the savings rate of urban households and find out which anticipation factor is leading;(2)research on the sensitivity and heterogeneity,to know that how IRAP announcement effect differs across the urban households;(3)study the influence of female retirement on the labour supply of male spouses and its direction,scale and mechanism,check whether the influence interfere the anticipation of IRAP.Based on the existing literature and theoretical basis,this dissertation detailed studies issues about savings rate and labour supply of urban households in the anticipation of IRAP which are mentioned previously advocacies using the micro data of the Chinese Household Panel Survey(CFPS),by following the fact of on-going anticipation of IRAP and exploring the ex-ante policy evaluation in an ex-post way.According to the results of this research,the relevant policy advocacies are put forward.The conclusions drawn from this dissertation are as follows:First,the exogenous shock of IRAP announcement significantly reduces the average savings rate of urban households.Since retirement externalities do not have an impact in extensive margin and personal income,the possible effect on anticipation of IRAP could be excluded.Through a direct reading and the comparative analysis of Search Index and Media Index of Baidu,it can be confirmed that the release of the "12th Five-Year Plan for Social Security" in June 2012 and the media interpretation have induced a spontaneous and continuous anticipation of the IRAP among the urban households.By full sample analyses and specific tests for consumption channels,a strong announcement effect is found that urban households' saving rate fall significantly via an anticipation of income increasing mainly: the household,on average,decreases its saving rate by 5% for each additional labour force,or 0.2% for each extra year to mandatory retirement.Even excluding rigid expenditure such as health care or education spending,the saving rate is still falling.There has been no significant change in health anticipations,and health care spending as a share of total household consumptive expenditure,has remained stable.The results illustrate a high robustness after the specific tests for parallel trend assumption,controlling pre-existed polynomial time trends among the groups and regions,placebo effect,potential measurement errors due to survey time,possible confounded identification by tax shocks and cyclical disturbance in consumption.Overall,IRAP can effectively reduce the savings rate for urban household and further unlock the potential consumption of households.Second,the IRAP announcement effect varies dramatically across the households.Specifically,the households with more attention to social and economic news or closer to retire for its host are more sensitive to the announcement.Those with higher saving rate are relatively more difficult to decrease their saving rates via panel quantile regressions.Those with binding liquidity constraints are likely to reduce their savings rates and vice versa,that holds under a variety of measures of liquidity constraints.Third,the retirement of women at the age of 50 does exhibit an influence on their spouses' labour supply.The influence is not significant in terms of extensive margin and does not affect the retirement and labour participation decisions of males.However,at the intensive margin,influence of female retirement makes significant decreasing in the average working hours of males on the job,approximately by above 1.8 hours.However,the decreasing on working hours of working males does not induce a fall of their personal income,and the decreased parts are likely to be transfer entirely into males' leisure time.The influence of female retirement works by the mechanism of common leisure preferences of couples.It is more pronounced in households that couples live without their parents(and in-law),or are healthy on both sides,due to more feasibilities for enjoying togetherness.There is little influence among males who work within the system or have completed high school or higher education.On the level of qualitative analysis,the female retirement presents positive intra-household externalities but probably negative externalities to social production.Since the decline in the labour supply of male spouses does not occur at the margin of extensive margin and does not reduce personal income,it may not change the anticipation of male's labour participation and future income.After the announcement of the IRAP,the incentive effect of female retirement to reduce the level of male labour supply falls,which supports the rationale of raising the legal retirement age for women specially.The empirical studies of this dissertation at the micro level are not isolated,some of the quantitative results are close to the results of existing macro literature,and some qualitative findings are consistent with some other ones linked to these issues.According to the above empirical conclusions,this dissertation also puts forward corresponding policy advocacies,including but not limited to: strongly encourage women to postpone retirement,strengthen the protection of legitimate labour rights,prudently making and announcing IRAPs,and enrich the supporting measures to IRAPs,etc.The research of this dissertation has a certain contribution.The first,the author uses micro data for empirical research instead of macro data and numerical simulation methods used in the existing relevant studies,providing behavioral evidence which is new,at a micro level for comparative reference.The second,considering the anticipation formation and continuity period between policy announcement and its future implementation,the method of ex-post evaluation is used to make an ex-ante evaluation,which provides a new research perspective.Finally,the interaction of labour supply among members of the family has been less concerned in the literatures on retirement at both macro and micro level,this dissertation however studies the related issues,link with the gender difference of the mandatory retirement and the legal retirement age in China.