The shattered “Iron Rice Bowl”: Intergenerational effects of Chinese State-Owned Enterprise reform

Reform of the Chinese State-Owned Enterprise (SOE) sector in the late 1990s triggered massive layoffs (34 million employees) and marked the end of the “Iron Rice Bowl” guarantee of employment security for the remaining 67 million workers. An expanding international literature has documented the adverse health impacts of economic insecurity on adults, but has typically neglected children. This paper uses the natural experiment of SOE reform to explore the causal relationship between increased parental economic insecurity and children's BMI Z-score. Using province-year-level layoff rates and income loss from the layoffs, we estimate a generalised difference-in-differences model with child fixed effects and year fixed effects. For a medium-build 10-year-old boy, a median treatment effect implies a gain of 1.8 kg and a 2.2-percentage-point increase in the overweight rate due to the reform. Anxiety about potential losses causes weight gain for boys whose SOE parents kept their jobs. Unconditional quantile regressions suggest that boys who are heavier are more likely to gain weight. Girls are not significantly affected. Intergenerational effects therefore increase the estimated public health costs of greater economic insecurity