Summary:
It is very common in various countries for paternal or maternal grandparents to provide childcare for their grandchildren. Moreover, this practice is even more prevalent among grandparents in China due to cultural traditions and the insufficiency of formal care services provided by the public and private sectors. Meanwhile, with the acceleration of population aging and a decline in economic growth rates, many countries are facing long-term financial sustainability risks in their pension systems. To address this risk, many countries have either implemented or are preparing policies to delay the retirement age. The Chinese government is also set to implement such a policy in the next few years. The extension of the retirement age prolongs people's working years and social security contribution periods, and it delays the time for working people to receive pension benefits. This can alleviate the financial pressure on pension funds to a certain extent. On the one hand, delaying retirement not only increases individuals' wage income during their later years but also enhances parents' monetary transfers to younger generations, potentially contributing to higher fertility rates. On the other hand, delaying retirement may have adverse effects on working grandparents providing childcare for grandchildren, increasing the time costs associated with childbearing, and consequently exerting a negative impact on fertility rates. Furthermore, the reduction in intergenerational care time places an additional burden on young parents, increasing the time they need to allocate to childcare. This, in turn, diminishes the labor supply of the younger generation, affecting investment in child education, human capital accumulation, and economic growth. How does delaying retirement affect fertility, human capital, and thus economic growth？ To the best of our knowledge, there is limited literature that examines the micro-mechanism of how delaying retirement influences economic growth, particularly from the perspective of intergenerational care. In terms of policy implications, if delaying retirement has a negative effect on fertility or economic growth, the government should implement corresponding supportive policies to mitigate these adverse effects. Research on these issues holds significant theoretical value and carries important policy implications. In view of this, this paper employs an extended dynastic family model to examine the micro-mechanism of delaying retirement affecting economic growth. The results show that the effect of delaying retirement on fertility depends on young individuals' preferences for the number of children, as well as the comparison between income effects and grandparents' childcare effects. Delaying retirement extends working years and raises wage income, contributing to an increase in bequests transferred to younger generations, thereby positively affecting fertility rates—referred to as the income effect. However, delaying retirement reduces time transfers from grandparents to young people, raising the time costs associated with childbearing and exerting a negative impact on fertility rates—referred to as the grandparents' childcare effect. Numerical simulations reveal that when individuals have a relatively low preference for the number of children, the income effect dominates, leading to an increase in fertility rates. Conversely, when individuals have a strong preference for the number of children, the grandparents' childcare effect dominates, resulting in a decrease in fertility rates. As delaying retirement reduces the time transfer from parents to younger generations for childcare, increasing the time young individuals spend on childcare, it diminishes their labor supply. This, in turn, reduces the wage income of the younger generation, potentially leading to decreased educational investments in each child, which is unfavorable for long-term economic growth. However, numerical simulations suggest that the magnitude of this reduction is limited. To mitigate the adverse effects of delaying retirement on fertility rates and long-term economic growth, the government could consider several aspects: (1) Incentive compatibility policies for receiving different pension shares can be set according to different reference points of retirement age. A flexible policy for the age at which individuals can access their pensions could help reduce the negative impact of the policy on grandparents' childcare. (2) The government should vigorously develop a public childcare system and incorporate childcare services for infants aged 0-3 into the public service system. Additionally, provide policy support for families that require intergenerational care, such as a leave system similar to maternity leave. For grandparents who need to care for newborn grandchildren while still working, they could apply for a period of intergenerational care leave, mitigating the impact of delaying retirement on intergenerational care time. The government should develop both formal and informal childcare simultaneously to alleviate the work-life balance of women during the childbearing period. (3) Recognize that the cost of raising children and education expenses are crucial factors influencing fertility. The government can consider policies such as tax incentives, childcare subsidies, and housing support for families during the childbearing and child-rearing years. Finally, provide support and guarantees for women to return to work or employment after childbirth, fostering a childbirth-friendly social environment and reducing the opportunity costs associated with childbearing. The paper employs an extended dynastic family model with grandparents' childcare to study the micro-mechanism of the impact of delaying retirement on economic growth. The study aims to enrich and deepen the existing literature on the economic effects of delaying retirement. A potential avenue for future research is to explore the effects of delaying retirement on pension replacement rates, individual pension wealth, pension fund balance, and welfare from the perspective of grandparents' childcare.
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