Family-Size Effect on Intergenerational Income Mobility under China’s Family Planning Policy: Testing the Quantity–Quality Trade-Off

Abstract

The causal link between family size and human capital investment in children is critical for family planning policy. However, empirical studies aiming to test the quantity–quality trade-off are far from sufficient. This paper tried to estimate the family-size effect on intergenerational income mobility using China Family Panel Survey (CFPS) data. The empirical model of intergenerational income mobility with respective to family size was formulated, and the fertility rates allowed by family planning policy were used as an instrument variable for family size. It was found that intergenerational income elasticity tended to decrease with an increase in family size. The impact of family size on intergenerational income elasticity was sensitive to the income rank positions, and nonlinearity in intergenerational transmission of income under unequal family was observed. A quantity–quality trade-off analysis was applied to further test the family-size effect. Pronounced family-size effects were observed in low-income regions with tight budget constraints and in regions with less-developed credit markets, followed by an obvious quantity–quality trade-off. The sex difference in intergenerational transmission of income may be attributed to the existence of the “preference to sons over daughters” phenomenon. The present work provides a theoretical basis for shaping family planning policies toward sustainability.