Intergenerational Transfer, Human Capital and Long-Term Growth in China Under the One Child Policy

34 Pages Posted: 29 Jun 2013 Last revised: 8 Nov 2021

See all articles by Xi Zhu

Xi Zhu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

John Whalley

University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for International Governance and Innovation (CIGI)

Zhao Xiliang

Xiamen University - Department of Economics

Date Written: June 2013

Abstract

We argue that the demographic changes caused by the one child policy (OCP) may not harm China's long-term growth. This attributes to the higher human capital induced by the intergenerational transfer arrangement under China's poor-functioning formal social security system. Parents raise their children and depend on them for support when they reach an advanced age. The decrease in the number of children prompted by the OCP resulted in parents investing more in their children's educations to ensure retirement consumption. In addition, decreased childcare costs strengthen educational investment through an income effect. Using a calibrated model, a benchmark with the OCP is compared to three counterfactual experiments without the OCP. The output under the OCP is expected to be about 4 percent higher than it would be without the OCP in 2025 under moderate estimates. The output gain comes from a greatly increased educational investment driven by fewer children (11.4 years of schooling rather than 8.1). Our model sheds new light on the prospects of China's long-term growth by emphasizing the OCP's growth enhancing role through human capital formation under the intergenerational transfer arrangement.

Suggested Citation

Zhu, Xi and Whalley, John and Xiliang, Zhao, Intergenerational Transfer, Human Capital and Long-Term Growth in China Under the One Child Policy (June 2013). NBER Working Paper No. w19160, Available at SSRN: https://ssrn.com/abstract=2287020

Xi Zhu (Contact Author)

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

John Whalley

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada
519-661-3509, ext. 83509 (Phone)
519-661-3666 (Fax)

HOME PAGE: http://www.ssc.uwo.ca/economics/faculty/

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for International Governance and Innovation (CIGI) ( email )

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Waterloo, Ontario N2L 6C2
Canada

Zhao Xiliang

Xiamen University - Department of Economics ( email )

Xiamen, Fujian 361005
China

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