The One-Child Policy and Household Saving
From Taha Choukhmane, Nicolas Coeurdacier and Keyu Jin
We investigate whether the ‘one-child policy’ has contributed to the rise in China’s household saving rate and human capital in recent decades. In a life-cycle model with intergenerational transfers and human capital accumulation, fertility restrictions lower expected old-age support coming from children—inducing parents to raise saving and education investment in their offspring. Quantitatively, the policy can account for at least 30% of the rise in aggregate saving. Using the birth of twins under the policy as an empirical out-of-sample check to the theory, we find that quantitative estimates on saving and education decisions line up well with micro-data.
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Choukhmane, Taha, Nicolas Coeurdacier, and Keyu Jin, MIT Sloan Working Paper 6138-17. Cambridge, MA: MIT Sloan School of Management, December 2021.