Human Capital and the Only-Child Premium: Evidence from China’s One Child Policy

Abstract

We study the effects of China’s One Child Policy on the education and labour market outcomes of women and men born in its wake. We present evidence from a difference-in-difference design that the One Child Policy led to a significant rise in the fraction of both boys and girls who grew up as only-children in the late 1970s and 80s. We then use the policy-induced increase in only-children to estimate the causal effect of growing up as an only-child on education, earnings and occupational choice. Our results indicate substantial positive effects of only-child status for both men and women. In contrast to the typically small quantity-quality trade-offs identified in prior literature, the only-child premium we estimate is large and economically meaningful. We argue that this is consistent with the theory, which allows for non-linearity of the effect of child quantity on quality. We conclude that the One Child Policy contributed considerably to the rise of human capital in urban China since the 1980s.