Anticipated Children and Educational Investment: Evidence from the One-Child Policy in China

Children can be costly both in terms of finances and time. Those who want children and their families may take this into account when making educational decisions earlier in life. Does the number of future anticipated children affect educational investment in parents-to-be? During the one-child policy in China, second-child permits allowed specific groups to have a second child without paying a fine. Changes in the eligibility criteria for this permit provide geographic and temporal variation in the cost of having a second child. I first show that second-child permits indeed had an effect on the number of children: They strongly increased the likelihood of having a second child in the 1990s and 2000s. I then investigate changes in the eligibility rules when individuals are about to finish mandatory education. I compare the educational attainment of those that fulfilled an eligibility criterion for a second-child permit at secondary school age with those that did not. I find that eligibility at secondary school age increases the likelihood to continue education. Anticipating another child seems to increase educational investment as the effect is concentrated among those predicted to have only one child when not eligible. This effect, clearer for men than for women, can be explained by the high costs of raising children in China.