Impact on Age at Retirement

Whereas the previous two subsections analyze the effect of the child’s gender on both retired and working parents, this section estimates the effect on retired parents by using parents’ age at retirement as an alternative dependent variable with the OLS estimation model as follows:

0 1

i i X i i

Age   chgender X  , (1.8) 

where Agei denotes the respondent’s age at retirement, X denotes a set of characteristics _i

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occupation, gender, and birth cohort8, logged labor income, and the age gap between parent and the youngest child. All variables are measured at the time of retirement. The number of

observations are 2,310 (1,338 males; 972 females), and the mean age at retirement is 60.2 (62.3 for the males; 57.2 for the females).

Table 1.11 shows the results of the OLS estimation. In column (1), the result indicates that the parent’s age at retirement increases by around 1.5 years when all children are sons rather than daughters; this effect is statistically significant at the 5% level. Given that the average retirement age is 60.2, the result implies an increase of 2.5 percent in retirement age. Column (2) in Table 1.11 shows the retirement age of a parent increases depending on the number of sons, but not the number of daughters. The results indicate that an additional son causes his parent to delay retirement by nearly 0.7 years (p-value=0.001). By contrast, the effect of the number of daughters (0.2 years) is substantially less and is statistically insignificant.

The “son effect” depending on birth order is also estimated, and the results are shown in column (3) of Table 1.11. The results suggest that if the first-born child is a son, then a working parent tends to delay retirement by 0.7 years compared to when the first-born child is a daughter. This effect is statistically significant at the 5% level. Similarly, having a second son leads to an increase of the retirement age of a parent by 0.6 years though this is only marginally significant (p-value is 0.107). This “son effect” decreases gradually with the later position in birth order. The results of all specifications in this subsection are consistent with the previous results drawn from models estimating the impact of the gender of offspring on the probability of retirement and weekly working hours.

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Table 1.11. OLS Estimations (Dependent Variable: Age at Retirement)

(1) (2) (3)b Ratio of sons 1.474 ** (0.577) Number of sons 0.673_(0.198) *** Number of daughters 0.201 (0.165)

1st child’s gender (1 if son, 0 otherwise) 0.711_(0.356) **

2nd child’s gender (1 if son, 0 otherwise) 0.591

† (0.366) 3rd child’s gender (1 if son, 0 otherwise) 0.521 _(0.423)

4th child’s gender (1 if son, 0 otherwise) 0.185 _(0.577)

5th child’s gender (1 if son, 0 otherwise) -0.225 _(0.833)

Number of children 0.426_(0.153) *** Dummies _Included

Gender (1=male) 4.278 *** (0.441) 4.296*** (0.441) 4.267*** (0.443) Education (1=high school or more) -0.700*

(0.401)

-0.699* (0.401)

-0.770* (0.405) Employment status (1=self-employed) 1.697***

(0.408)

1.703*** (0.408)

1.679*** (0.411) Age gap between parent & youngest child 0.140***

(0.042)

0.140*** (0.042)

0.142*** (0.042)

Other characteristicsa Yes Yes Yes

Obs. 2,310 2,310 2,310

Adj. R-sq 0.406 0.406 0.409

Notes: Robust standard errors in parentheses. †, *, **, and *** indicate statistical significance at the 15,

10, 5, and 1 percent level, respectively.

a _{Dummies for public pension enrollment, occupation, marital status, spouse’s work status, and birth}

cohort, and logged labor income; All variables are measured at the time of retirement.

30 1.6 Conclusions

This study examines the relationship between intra-household transfers and the labor supply of older parents in Korea by using “child’s gender” as an exogenous variable which leads to parents’ differential lifetime net transfers to children. Based on evidence that parental lifetime net transfers to sons are larger compared to that to daughters, this study tests if parents with sons tend to work more in order to fund these higher transfers. The following four results are obtained from various estimation models. First, having sons decreases the probability of parents’

retirement, relative to daughters. Second, parents who have sons tend to increase their working hours compared to those who have daughters. Third, the retirement age of parents is greater when parents have sons rather than daughters. Fourth, this “son effect” is substantial in the case of first-born male children. These results support the argument that having sons increases the labor supply of elderly parents in Korea, relative to daughters. This study argues that a possible mechanism for the differential labor supply of elderly parents according to the gender of

offspring is the difference in parents’ lifetime net transfer to children between sons and

daughters. Because parents’ lifetime net transfer to sons is on average larger than to daughters, parents with sons may increase their labor supply to make up for income expended in order to maintain consumption levels after retirement.

The “son effect” on the labor supply of elderly parents in Korea may be a unique phenomenon occurring in the transition period. Due to son preference or an implicit contract between parents and sons, parents traditionally allocate more household resources to sons than to daughters. However, in this transition period, elderly parents may not be supported by grown-up sons after retirement as much as parents might have expected due to the declining strength of familial support systems where sons typically played a key role in supporting their parents, as

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well as the substantial improvement in women’s socio-economic status in Korea, which

increases the bargaining power of women in the household. Working in old age does not always generate disutility. The involuntary labor supply resulting from an unexpected income loss can, however, mean serious distresses to an individual’s welfare. If there is an excess supply of elderly labor in the labor market, this may make the matter worse. Accordingly, the results of this study have some noteworthy implications for countries like Korea experiencing significant old-age poverty in conjunction with a lack of a well-developed social pension system. The costs of child-rearing, often hampering parents from saving for retirement should be reduced in order to alleviate old-age poverty, especially in the areas of education and the provision of housing for newly-wed children. Additionally, policymakers need to pay more attention to elderly parents likely to face retirement without sufficient financial preparation due to the transition period: the responsibility for supporting the elderly is shifting from family members (particularly sons) to the elderly themselves and to the state.

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