Family planning policy and the well-being of elderly in China

The trade-off between child quality and child quantity is a much investigated phenomenon in (development) economics. Among other things, children are known to support their elderly parents - especially in poorer societies which are traditionally characterized by low levels of public care provision and weak social security nets. In this paper, we use the China Health and Retirement Longitudinal Study (CHARLS) to provide causal effects of the number of children on health related outcome measures of elderly Chinese. To overcome the endogeneity problem related to the number of children (which is clearly affected by parents' preferences), we make use of exogenous variations induced by three phases of family planning policies which were implemented over the last decades. Closely following previous research by Fei Wang (2012, 2013) we show in our first stage that the degree of exposure to family planning policies is different across birth years, residences and ethnicities of females - and has indeed contributed to the decline in the overall fertility rate. Using these exogenously induced variations in the number of children our main results suggest that having fewer children has on average rather positive effects on several dimensions of health for elderly females and males, respectively. Looking further into the underlying mechanisms, we find that having fewer children leads to significantly larger financial transfers to the parents.