The impact of China’s one-child policy

This article is an excerpt from my research paper “Re-thinking about China’s One-Child Policy”. I reviewed the existing literature about one-child policy and summarized the impact of it.

The one-child policy has reduced the fertility level in China substantially. As the following graph shows, China’s Total Fertility Rate (TFR) has declined from around 6 in the 1950s to below 2 now (United Nations, 2010).

The reduced fertility level accelerates the aging of the Chinese society. China’s total dependency ratio (defined as the population aged below 15 and above 64 as a percentage of the population aged between 15 and 64) increased steadily in the 1950s and leveled off in the 1960s (United Nations, 2010). After the one-child policy was implemented, the total dependency ratio fell steeply from nearly 80 to 50 in ten years and has been decreasing steadily since the 1990s. The current dependency ratio, 38.2, is below the world average of 52.4. An expanding elderly population will requrie more support in terms of income and healthcare. While families have traditionally been the provider of such support in China, this is less reliable now as rural-urban migration is common and social requirements of filial obligations are looser (Bloom, Canning, and Fink, 2011).

The government needs to encourage fertility to foster sustainable economic growth. Either a relaxed version of the policy or financial compensation should be implemented. A recent estimation of the model of fertility choice suggests that a subsidy of 1 year of income to families without a son would reduce the number of “missing girls” by 67 percent, but impose an annual cost of 1.8 percent of Chinese GDP. Alternatively, a 3-child policy would reduce the number of “missing girls” by 56 percent by increase the fertility rate by 35 percent (Ebenstein, 2009).

The one-child policy affects human capital levels and consequently the economic growth. Since human capital includes knowledge and skills, and economic development depends on advances in technological and scientific knowledge, development probably depend on the accumulation of human capital (Becker, Murphy, and Tamura, 1994). The choice of human capital level, however, is a micro decision. The influential model developed by Becker and Lewis (1973) suggests that families face a quantity-quality tradeoff when they choose fertility levels. The one-child policy has prompted parents to invest more in the education of each child. The higher human capital level in turn brings about economic advances. The empirical evidence for this argument, however, is not strong. Rosenzweig and Zhang (2009) used data from Chinese families with twins to measure the quality-quantity tradeoff controlling birth weight and birth spaces, but they only found the impact of one-child policy on human capital improvement to be modest. The one-child policy has a specifically important impact for females, empowering urban girls with better personal development (Fong, 2002).

The human capital channel and the aging channel should be viewed together to evaluate the one-child policy. If some workers have high levels of human capital because parents have invested more in children’s development, standards of living may improve despite the unfavorable change in age structure. By adopting the classic OLG (Overlapping Generations) model, Lee and Manson (2010) have shown that an increase in human capital associated with lower fertility may offset the greater costs of supporting the elderly in the older population.

The one-child police has a significant impact on China’s sex ratio. Chinese people have a strong cultural preference towards boys. Since couples have fewer children than before, the effect of gender selection is likely to be more significant. The one-child policy had resulted in 7.0 extra boys per 100 girls for the 1991-2005 birth cohort (Li, Yi, and Zhang, 2010). The skewed sex ratio causes a rise in excess male population and the number of unmarried men, which threatens the stability of the Chinese society. From 1988 to 2004, a 0.01 increase in the sex ratio is estimated to have raised violent and property crime rates by about 3% (Edlund et al, 2007). The implementation (timing, strictness, amount of fine, etc) of the one-child policy is strongly related to the province leaders’ characteristics and varies across regions.

References:

Becker, G. S. and Lewis, H. G. 1973. “On the Interaction between the Quantity and Quality of Children,” The Journal of Political Economy 81: 279–288.

Becker, G. S., Murphy, K. M. and Tamura, R. 1994. Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, 3rd ed. The University of Chicago Press.

Bloom, D. E., Canning, D. and Fink, G. 2011. “Implications of Population Aging for Economic Growth,” NBER Working Paper No. 16705.

Ebenstein, A. 2009. “Estimating a Dynamic Model of Sex Selection in China,” Demography 48(2): 783-811.

Edlund, L., Li, H., Yi, J. and Zhang, J. 2007. “Sex Ratios and Crime: Evidence from China’s One-Child Policy,” The Institute for the Study of Labor (IZA) discussion paper No. 3214.

Fong, V. L. 2002. “China’s One-Child Policy and the Empowerment of Urban Daughters,” American Anthropologist 104 (4): 1098-1109.

Lee, R. and Mason, A. 2010. “Fertility, Human Capital, and Economic Growth over the Demographic Transition,” European Journal of Population 26(2): 159-182.

Li, H., Yi, J. and Zhang, J. 2010. “Estimating the Effect of the One-Child Policy on Sex Ratio Imbalance in China: Identification Based on the Difference-in-Differences,” IZA discussion paper No. 5149.

Rosenzweig, M.R. and Zhang, J. 2009. “Do Population Control Policies Induce More Human Capital Investment? Twins, Birth Weight and China’s ‘One-Child’ Policy,” The Review of Economic Studies 76: 1149-1174.

United Nations. 2010. World Population Prospects.

 

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