Does China's Birth Control Policy Really Induce More Human Capital Investment? A New Perspective Based on Population Structural Change Effect

Abstract

This paper reexamines the issue of whether China's birth control policy induces more human capital investments per child. Rosenzweig and Zhang(2009) found there was significant tradeoff between number of children and child quality in China thus concluded that the contribution of China’s one-child policy to the development of its human capital was modest at best. However, quantity-quality tradeoff effect may be not the whole story, while which part of population is reduced also matters. In practice the one-child policy is more strict in urban areas than in rural areas, thus it may induce that birth rate in backward rural areas where human capital investment in children is lower is far higher than urban areas. In our paper we first define and stress the importance of population structural change effect on human capital investment. We construct a theoretical model and find out the math form of population structural change effect and quantity-quality tradeoff effect together, which are similar to income effect and substitution effect in microeconomic theory. Finally we empirically prove that China's birth control policy induced that rural birth rate rural was far higher than urban, implicating a negative population structural change effect which may offset the potentially positive quantity-quality tradeoff effect on human capital. Thus China’s birth control policy may not induce more human capital investment of the country.