E2025003                                                               2025-03-11
 

Yewen Yu  Yi Fan  Junjian Yi

Abstract

Using the staggered rollout of the One-Child Policy (OCP) across province and birth cohort as a quasi-natural experiment, we demonstrate that differential fertility between richer and poorer households exacerbates intergenerational income inequality. Rural/poorer families, who are less constrained by the OCP than their urban/richer counterparts, tend to have more children but invest less in each child’s human capital. Given the crucial role of human capital in determining earnings, this disparity leads to decreasing income mobility across generations. This declining intergenerational mobility is driven by increasing economic status of children born to urban/wealthier families. Our estimates suggest that the OCP contributes to approximately 25% of the decline in intergenerational income mobility in China, shedding light on future urban-rural inequality from a demographic perspective. 

Key words: Urban-rural disparity; Differential fertility; Intergenerational transmission of inequality; One-child policy

JEL Codes: J13; J62; R1

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