China’s family planning policies and their labor market consequences

Abstract

China initiated its family planning policy in 1962 and its one-child policy in 1980, and it allowed all couples to have two children as of 1 January 2016. This paper systematically examines the labor market consequences of China’s family planning policies. First, we briefly review the historical evolution of China’s family planning policies and the existing literature. Second, we investigate the effects of these policies on the labor market, focusing on the size and quality of the working-age population and its age and gender composition. We give special attention to regional differences in the demographic structure resulting from the interaction of the family planning policies and internal migration. Finally, we discuss ongoing and prospective policy changes and their potential consequences. Although urban areas and coastal provinces have implemented stricter family planning policies, our analysis shows that because of internal migration, the aging problem is more severe in rural areas and in inland provinces. Our simulation results further indicate that the new two-child policy might fall short of pulling China out of its aging situation.