Job insecurity and fertility: Evidence from massive lay-offs in urban China

Abstract

We exploit a staggered reform of state-owned enterprises (SOEs) in the late 1990s in China to provide plausibly causal evidence that job insecurity has a first-order impact on fertility. Prior to the reform, unemployment rates were low and job security for SOE workers paralleled that of government employees. Post-reform, numerous SOE employees were laid off and their contracts were no longer permanent, but government employees continued to enjoy high levels of job security. We find that the reform caused SOE employees who retained their positions to delay having their first child by 0.718 years. The spillover effects are sizable: employees in the untargeted private sector delay starting a family by 0.387 years. Despite the importance of family lineage in China at the time, our findings indicate that the fertility response transcended mere birth timing adjustments, and decreased couples’ likelihood of having children. Specifically, the reform initially reduced the number of births by 8.4 % in the short run and had a more pronounced long-term effect on completed fertility at age 45.