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When a son is born: The impact of fertility patterns on family finance in rural China

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  • Ding, Weili
  • Zhang, Yuan

Abstract

This paper examines the impact of an observable “shock”, the birth of a son, on household financial activities in rural China. We propose theoretical channels that endogenously generate heterogeneity in the levels of financial activities on the basis of a child's gender, even if parents do not possess discriminatory tastes, which we refer to as the “invest via a son” hypothesis compared to the conventional “taste for a son” explanation. Using nationally representative household data collected in 300 rural Chinese villages and econometric models that account for censored financial activities as well as endogenous fertility choices such as sex selection, we present strong evidence that having a son increases the amount of gifts and remittances a household receives from others by over 20%; it also increases both the amounts that a family loans and gives to relatives and friends. Moreover, having a son is found to increase household investments in both agricultural activities and family businesses while no type of expenditure increase with the arrival of a son, clearly consistent with our “invest via a son” hypothesis. Taken together, these results suggest that social conventions play important roles in household financial decisions that extend beyond the traditional role of budget constraints and consumption shocks.

Suggested Citation

  • Ding, Weili & Zhang, Yuan, 2014. "When a son is born: The impact of fertility patterns on family finance in rural China," China Economic Review, Elsevier, vol. 30(C), pages 192-208.
  • Handle: RePEc:eee:chieco:v:30:y:2014:i:c:p:192-208
    DOI: 10.1016/j.chieco.2014.06.008
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    References listed on IDEAS

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    Cited by:

    1. Du, Julan & Wang, Yongqin & Zhang, Yan, 2015. "Sex imbalance, marital matching and intra-household bargaining: Evidence from China," China Economic Review, Elsevier, vol. 35(C), pages 197-218.
    2. Chao, Chi-Chur & Laffargue, Jean-Pierre & Yu, Eden, 2011. "The Chinese saving puzzle and the life-cycle hypothesis: A revaluation," China Economic Review, Elsevier, vol. 22(1), pages 108-120, March.
    3. Xu, Bing & Pak, Maxwell, 2015. "Gender ratio under China's two-child policy," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 289-307.
    4. Claus C Pörtner, 2010. "Sex Selective Abortions, Fertility and Birth Spacing," Working Papers UWEC-2010-04-R, University of Washington, Department of Economics, revised Aug 2010.

    More about this item

    Keywords

    Rural finance; Rural China; Fertility; Gender differences; Censored models;

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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