Does the Two-Child Policy Affect the Consumption Upgrade of “Two-Child Families”: Based on CFPS Data from the Chinese Family Tracking Survey

Abstract

Purpose – In the context of the continued low consumption rate of Chinese residents, the increasingly aged society in China, and the decline in the birth rate, the Chinese government has gradually liberalized the fertility policy. The twochild policy has undergone policy adjustments from “only child of both parties” in 2011 to “only child of one party” in 2014, and then to the “Universal” policy in 2016, which marked the complete end of the “one-child policy” implemented since the 1970s. The purpose of this paper is to assess the effect of the “two-child birth policy” on the consumption upgrading of urban households, and to explore the mechanism of the effect. Design/Methodology/Approach – Through the quasi-natural experiment of the “two-child policy”, empirical analysis is carried out using the panel data of the China Family Tracking Survey (CFPS) database from 2012-2018. In order to improve sample selection bias and endogenous problems as much as possible, double-difference (PSM-DID) methods based on propensity score matches were adopted to construct the experimental and control groups to empirically test the impact of the second-child policy. A robustness test was carried out through methods such as parallel trend tests and sample size reduction. Further heterogeneity analysis of the policy action mechanism was conducted using the triple difference method (DDD). Findings – (1) In general, the “two-child policy” has promoted the upgrading of household consumption levels and consumption structures. (2) Furthermore, research findings of a triple difference (DDD) model were that the effect of fertility policy between household consumption levels and consumption structure was different across target households with different levels of household wealth. That is, the higher the wealth level of the household, the more the fertility policy promoted an increase in household consumption and an upgrade of the consumption structure, but for education consumption expenditure, regardless of household wealth level, the fertility policy promoted a significant increase in household consumption expenditure and had a “crowding out effect” on other developmental hedonic consumption of the household, and the lower the wealth level, the more pronounced the crowding-out effect. Research Implications – This paper studies the consumption of urban residents from the perspective of the characteristics of family population structure. It uses Chinese empirical data to test the applicability of relevant consumption theories in China, and provides perfect unique sample data for the academic community. By exploring the mechanism of the impact of the fertility policy on the consumption level and structure of residents, it can provide a reference for evaluating past population and economic policies. However, it provides a theoretical basis and guidance for the formulation of population and economic policies in the future, and the implementation of supporting policies for the “Three-Child Policy”.