The Shattered “Iron Rice Bowl”— Intergenerational Effects of Economic Insecurity During Chinese State-Owned Enterprise Reform

Reform of the Chinese state-owned enterprise (SOE) sector in the late 1990s produced massive layoffs (34 million employees) and marked the end of the “iron rice bowl” guarantee of employment security. An expanding international literature has documented the adverse health impacts of economic insecurity on adults but has usually neglected children. This paper uses the natural experiment of SOE reform in China to explore the causal relationship between increased parental economic insecurity and children’s BMI Z-score. Using provincial and year-level layoff rates and income loss from the layoffs, we estimate a generalized differences-in-differences model with individual fixed effects and year fixed effects. For a medium-built 10-year-old boy, a 10%-point increase in expected parental economic loss from layoff (largest treatment effect) implies a gain of 4 kg. The counterfactual analysis suggests a 4.5%-point increase in overweight rate due to the reform. The weight gain persists for boys whose parents kept their jobs, indicating the importance of anxiety about potential losses, as well as the experience of actual loss. Quantile regressions suggest that boys who were relatively overweight were more severely affected by parental economic insecurity. Girls are not significantly affected. Accounting for intergenerational effects therefore increases the estimated public health costs of greater economic insecurity.