Family planning policies are widely used to control population growth and promote human capital development. Exploiting the implementation of the one-child policy in rural China, this column shows that such policies also influence intergenerational mobility. While the one-child policy reduces family size and allows parents to devote more resources to each child, only parents in high-skill occupations spend these resources on their children’s education. The policy may enlarge the disparities in parental investments across different socioeconomic groups, leading to higher persistence of income and wealth across generations.
Family planning policies are widely implemented to reduce fertility rates and control population growth (de Silva and Tenreyro 2017). These policies also promote human capital development by leveraging the trade-off between child ‘quality’ and quantity (Becker and Lewis 1973). In economic terms, the marginal cost of investments in child quality (e.g. education or health) increases as family size increases, resulting in lower parental investments per child in larger families compared to smaller families. By reducing family size, family planning policies incentivise greater parental investments in each child, thus promoting human capital development both at the household and aggregate levels.
Notably, lower-income families tend to have larger family sizes than their higher-income counterparts (de la Croix and Doepke 2003). This negative correlation between income and fertility intensifies the intergenerational transmission of income inequalities (Bolt et al. 2021). With more siblings sharing fewer resources, children from low-income families receive even lower investments from their parents than children from high-income families and consequently earn lower incomes as adults. If family planning policies can flatten the income-fertility relationship, one may expect these policies to shape the intergenerational transmission of income.
In a recent paper, I explore the effects of family planning policies on the trade-off between child quantity and quality and the consequences for intergenerational mobility in the context of China (Xiao 2024). China implemented a series of strict family planning policies, including the one-child policy. The one-child policy was enforced through fines imposed on unauthorised births (Ebenstein 2010), with permits allowing some couples to have a second child (Scharping 2013). For example, members of some ethnic minority groups could apply for permits to have a second child without paying the fine. Eligibility criteria for permits and fine rates varied at the province-year level. As a result, the monetary penalty for higher-order births varied across couples, depending on their eligibility for second-child permits, province of residence, and the birth year of their first child. I use this variation to identify the causal effect of the one-child policy on family size and the health, education, and wealth of the firstborn, measuring different dimensions of child quality. 1 The treatment variable is the monetary penalty a couple anticipates for having a second child, measured as a multiple of their annual household income.
I use a sample of firstborn children born between 1966 and 1990 in rural China from the China Family Panel Studies conducted in 2010. The Panel Studies contain detailed information on a wide range of adulthood outcomes. Importantly, the Panel Studies ask respondents to recall their parents’ main occupations during their childhood. Lacking administrative data, it is often difficult to observe both the parents’ and the children’s income and wealth using census or survey data from developing countries. To address this issue, I use the father’s primary occupation as a proxy for the socioeconomic status of the parents, which allows me to quantify the effects of the one-child policy on intergenerational mobility. I classify occupations into three types: farming, low-skill work, and high-skill work.
Heterogeneity in the child quality-quantity trade-off
My first set of analyses reveals that the trade-off between child quantity and quality is heterogeneous across parents. More specifically, the same change in child quantity induced by the one-child policy is accompanied by different changes in the health, education, and wealth of the firstborn, depending on the occupation of the father (see Figure 1). The one-child policy penalty reduces family size and improves health outcomes for all children regardless of the father’s occupation. However, the effects on education and wealth exhibit significant heterogeneity across the fathers’ occupational groups. A higher penalty results in better educational outcomes for the firstborn only if the father works in a high-skill occupation. For farmers’ children, a higher one-child policy penalty leads to an increase in the value of farmland but not in education or other assets. Finally, for low-skill workers’ children, a higher one-child policy penalty increases assets, mostly housing properties, but not education or farmland.
Figure 1 Effects of the one-child policy penalty on firstborn children by paternal occupation types
The evidence points to two primary factors driving these differential responses. First, returns to education are lower when the father engages in farming or low-skill work as compared to high-skill jobs. Hence, low-skill workers and farmers prioritise investments in housing or farmland over education when the one-child policy relaxes their resource constraints.
The second factor is the higher opportunity cost of education for farmers’ children due to insecure land rights. Under China’s land tenure system, households risk losing their allocated land if all members work in the non-agricultural sector (Adamopoulos et al. 2024). Since education is crucial in facilitating non-agricultural employment, an opportunity cost of education emerges due to land rights insecurity. I show that this cost is borne by the younger child when parents have two children but shifts to the firstborn child when parents are unable to have another child due to policy constraints. Consequently, a reduction in the number of children from two to one increases the opportunity cost of education for the firstborn and generates a negative effect on education.
Fertility restrictions lead to higher intergenerational persistence in income and wealth
Additional analysis of labour market outcomes shows that the greater increases in educational attainment for high-skill workers’ children later translate into better occupational status, larger migration probability, and higher income compared to other children. The heterogeneous effects on income and wealth across paternal occupations then contribute to a decline in intergenerational income and wealth mobility. As the one-child policy penalty increases, the correlations between the father’s and the firstborn child’s income, farmland, and non-land assets all experience significant increases (see Figure 2). 2 My back-of-the-envelope calculation suggests that the changes in second-child penalty account for 35% of the changes in intergenerational correlations in income, 46% of the changes in correlations in land assets, and 26% in non-land assets between the cohorts born before and after the implementation of the one-child policy.
Figure 2 Effects of the one-child policy penalty on intergenerational correlations
Can the relaxation of the one-child policy increase mobility?
An important question arises regarding whether a policy that reduces the cost of having more children could foster intergenerational mobility. The Chinese government implemented the Two-Child Policy in 2015 and the Three-Child Policy in 2021. Yet, birth rates continued to decline, reaching their lowest level in 2023. One explanation is that housing and education costs are so high that many couples cannot afford to have more than one child.
My research confirms that when confronted with substantial one-child policy penalties, parents who are unable to have a second child tend to increase investments in education or housing for their only child. After years of the one-child policy, the costs associated with housing and education for an only child may have increased to such an extent that parents find it financially challenging to afford another child. Parents may be reluctant to compromise the wellbeing of their only child by having a second one. 3 Consequently, parents who invest a lot in the education or housing of their only child are unlikely to respond significantly to the relaxation of the one-child rule.
However, the relaxation of the one-child rule may result in increased fertility among farmers, who typically invest less in education or housing for their children and desire offspring to help sustain the household farm. Therefore, relaxing the one-child rule alone may not trigger an increase in intergenerational mobility, but could potentially increase the proportion of children from farming households with lower levels of education in the next generation.
These results underscore the importance of considering heterogeneity in parental responses when evaluating fertility policies. Policy-induced reduction in family size allows parents to devote more resources to each child, but only educated parents with skilled occupations spend these resources on children’s education. Parents engaged in farming or low-skill work do not increase educational investments but transfer more farmland or assets to the children. The heterogeneous responses to fertility restrictions amplify the differences in parental investments across socioeconomic backgrounds, thereby increasing intergenerational persistence in income and wealth. Policies that increase the returns to education or reduce the (opportunity) costs of education for children from disadvantaged backgrounds may mitigate such investment differences and improve mobility across generations.
Source : VOXeu
