China’s demographic transition: A quantitative analysis

Abstract

China’s fertility decline was very fast. But the drivers of this decline are not well understood. The common wisdom attributes it to the strict population control policies, particularly the One-Child Policy. Yet, fertility decline might also be due to the spectacular economic transformation and substantial mortality decline. To quantify the effects of different factors on China’s demographic and economic transition, I develop a two-sector overlapping-generation model with workers’ movement from rural to urban areas and endogenous fertility and education choices. Quantitative analysis shows that even without any population policy, the total fertility rate (TFR) would decline from 5.78 children around 1950 to 2.65 children around 2010. However, the population policies were crucial for the TFR to fall below the replacement level and do so very quickly after the 1980s. By around 2010, the cumulative effect of population policies reduced fertility from 2.65 to 1.30 children. The baseline model is also extended to incorporate the hukou system, considering that different hukou types are linked to different child quotas under the One-Child Policy and government transfers. The extended model suggests that the impact of the hukou system on fertility decisions was relatively minor.