“Selective two-child” policy and household resource allocation

Abstract

This paper estimates the effect of the “selective two-child” policy (The “selective two-child” policy allowed couples to have two children if one member of the couple was an only child (1-OC family)). on the resource allocation between generations amongst urban households in China by referring to the nationally representative China Household Finance Survey (CHFS). The results of propensity score matching (PSM) and difference-in-difference (DID) show that the total and per capita expenditures on children education are reduced significantly after the implementation of the “selective two-child” policy, testifying to the quantity-quality trade-off of children in Chinese families. Nevertheless, the financial support for the elderly not living in the household does not decrease, suggesting no intergenerational competition. Furthermore, the total and per capita expenditures for the qualified families decreased significantly, which indicates that the loosening of fertility policy may lead to new-oriented and unintended precautionary saving motives.