The Effect Of Health Shock On The Labor Force Participation Of Mid-aged And Older Chinese

China has entered the aging society in 2000. The process of aging is becoming faster and faster in the 21 st century. The change of population age structure has a profound effect on the society and economy. On one hand, social insurance funds have more medical and pension expenditure when the weight of aged population increases, and therefore the social burden increases. On the other hand, the aging of the population causes the shortage of labor force supply, which hinders social and economic development. The degree of the negative effect of the aging of population mainly depends on when the aged people retire. According to the theory of human capital, individual labor force supply depends on his human capital. And since health is widely considered as an important kind of human capital, and considering that health status is the main limiting factor for aged people to be engaged in activities, it is meaningful and helpful for dealing with the challenge of the population aging to study the effect of health status on the labor force supply of aged population.After reviewing relevant literature and theories, this paper studies the effect of health shock on the labor force participation of mid-aged and older people based on the CHARLS data. In order to deal with the endogenous problem of health variable, this paper takes advantage of panel data and put lagged variables,including labor force participation, health status and health behavior, into the model as controlling variables. Then health shock can be regarded as strictly exogenous. In addition, considering the dual economy system that has existed for a long time in China, this paper explores individual labor force supply in different systems when health shock happens, which makes up gaps for related fields.The results of this research are as followings.(1) Health shock has a significant effect on the labor force participation of mid-aged and older people. The labor force participation rate decreases 5.7 percentage points when elderly people encounter health shock. And health shock has a stronger influence on urban residents than rural residents.(2) Long-term health status has an insignificant effect on labor participation of urban residents, but has a significant effect on rural residents. The labor participation rate decreases 4.7 percentage points whenrural elderly people are not healthy.(3) The influence of health shock on urban residents mainly comes from the people whose age are between 45 and 60, while the influence on rural residents mainly comes from the people who are older than 60. This result shows that the pension insurance system in rural area has not been established completely, and that retirement system hinders the labor force supply of urban elderly residents.(4) The influence of health shock on urban residents who are older than 60 turns significant when the residents have got good education. Also the influence of health shock on rural residents who are older than 60 turns insignificant when the residents have got good education. This means education has a lagged rewarding effect and helps elderly people break system restriction.Based on the results above, several suggestions for policy have made: strengthen the construction of grassroots medical and health systems, and improve health status of the elderly; improve the pension and insurance system in rural areas; increase the statutory retirement age, and encourage the elderly to take part in social activities; strengthen education system for the elderly, and improve the human capital of the elderly.