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Fertility policy and household labor supply: Evidence from China's Universal Two-Child Policy

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  • Dong, Yanfei
  • Li, Qingyuan

Abstract

This study investigates how China's Universal Two-Child Policy (UTCP) affects household labor supply, advancing research on fertility-induced intrahousehold labor reallocation. Using data from the China Household Finance Survey and China Family Panel Studies, and employing difference-in-differences and event study designs, we find significant gender-based and intergenerational adjustments following UTCP implementation. Women's labor force participation decreases by 4.7 percentage points (primarily in formal employment), men's labor supply remains unchanged, and elderly participation increases by 2.6 percentage points (predominantly in informal employment). These adjustments are driven by economic and care burdens, reflected in higher domestic and educational services costs, reduced recreational expenses, and reallocated time use with more housework by women and less leisure among the elderly. Welfare effects reveal reduced female and elderly health, but improved life satisfaction for men. Our findings highlight the need to supplement fertility reforms with enhanced childcare support and gender-equity policies.

Suggested Citation

  • Dong, Yanfei & Li, Qingyuan, 2025. "Fertility policy and household labor supply: Evidence from China's Universal Two-Child Policy," Economic Modelling, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:ecmode:v:153:y:2025:i:c:s0264999325003402
    DOI: 10.1016/j.econmod.2025.107345
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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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