Does fertility intention affect household consumption? Evidence from China

Abstract

ABSTRACTChina is grappling with steep demographic challenges: low fertility rates, a shrinking labour force, and a rising old-age dependency ratio. Combined with its perennially high savings rates, these can stifle consumption spending and overall economic growth. This paper is devoted to analysing the effects of fertility intention, the precursor to fertility rates, on the average propensity to consume in China. Using the two-stage endogenous treatment regression model to account for the endogeneity of fertility intention, we analyse the 2019 and 2021 Chinese Social Survey (CSS) data collected by the Chinese Academy of Social Sciences. The results show that those intending to have more children spend less as a proportion of their income. Furthermore, individuals’ intentions to have more children are negatively associated with age and household size and positively associated with education. Getting remarried and fertility intention are also positively related. Disaggregated analysis shows that the effects of fertility intention on the average propensity to consume vary across household income quartiles, between males and females, urban and rural residents, and households of different sizes. Policies that simultaneously stimulate spending and incentivize having more children should be considered.