Less is More?
Beyond the Quantity–Quality tradeoff: Population control policy and human capital investment
In the modern world, high-income countries are characterized by low fertility and high human capital levels, whereas low-income countries are characterized by high fertility and low human capital levels.
Although high fertility is usually linked with poverty, the causal relationship is ambiguous and poverty may be the cause rather than the consequence of high fertility. However, popular belief holds that a reduction in fertility would increase the human capital investment per child.
According to the quantity–quality tradeoff theory introduced that given a family's limited resources, a small family size allows for the allocation of more resources to each child, thereby increasing the average child quality.
Human capital accumulation is one of the most fundamental factors that determine the long-term economic growth. Therefore, if the quantity–quality tradeoff exists, it seems rational for the governments to adopt population control policies to reduce family sizes and promote human capital investment in children, particularly in developing countries where low human capital levels usually hinder economic progress.
However, the truth is not as simple as it seems at first glance. The one-child policy (OCP) in China provides a perfect natural experiment to study the effect of population control policies on human capital.
China begun a voluntary yet strong family planning campaign in 1971, with the propaganda theme: “One child isn't too few, two are just fine, and three are too many.”
Shortly after that, in the national birth planning conference in 1973, the Chinese government endorsed the slogan: “Later, Longer, and Fewer”, in which “Later” meant the late marriage requirements for women (23 years) and men (25 years), “Longer” meant a birth planning rule of more than three years between the first and second child, and “Fewer” implied that a couple could have two children at most.
This family planning campaign was very successful, and China's overall fertility rate was halved between 1971 and 1978. Since 1979, China tightened and made its birth control policy coercive, after which each couple was limited to having only one child and those households that exceed this limit would be penalized.
It was the first time in human history for a government to control population growth by imposing an extremely strict birth quota on households. At that time, China was experiencing a very difficult economic situation, and implementing the OCP was considered necessary to relieve the great population pressure and facilitate its forthcoming economic takeoff.
We must consider not only the children that were allowed to be born, but also the reduced population. Specifically, if the foregone population is precisely among those who would potentially have gained the most valuable human capital if their birth had been allowed, then the human capital level of the whole country may well decline.
Testing the trade-off between child quantity and quality within a family is complicated by the endogeneity of family size. We find a negative correlation between family size and child outcome on children’s education.
In a developing country like China, where there is neither a good public education system nor generous support for childbearing and childcare, the cost of child quality is mostly borne by the parents. Thus, a quantity-quality trade-off is more likely in the Chinese case.
Many people are confronted whether they are going to marry and have a baby depend on their financial status. How shall we choose to?