One child policy and intergenerational mobility

This paper theoretically and empirically examines how fertility decline induced by the One Child Policy has affected intergenerational mobility in China. In a simple human capital investment model incorporating fertility and credit constraints, we show that fertility decline narrows the educational attainment gap between children from credit-constrained families and non-credit-constrained families, hence increases intergenerational mobility. We also provide empirical evidence to verify our theoretical predictions. Using variation in the implementation intensity of the One Child Policy across regions and birth cohorts, we address the endogeneity of the fertility decision. Estimation results show that lower fertility increases intergenerational mobility.