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The Number of Children and Home Purchase: Divergence and Choice

【Authors】
YANG Xintong, YI Chengdong
【WorkUnit】
YANG Xintong(Capital University of Economics and Business, 100070)YI Chengdong(Central University of Finance and Economics, 100081)
【Abstract】

The universal two-child policy gives Chinese parents more freedom in making fertility choices, but the policy was not effective and did not meet the expectations. At the same time, the rapid rise in housing prices has led to income and housing inequality. Whether income and housing inequality leads to inequality in fertility is a question that is important but overlooked in existing literature. First, we developed a simple life-cycle model and found through simulations that low- and middle-income households were subject to budget constraints due to high child-raising costs and housing prices, so they could only choose between having children and buying a home; high-income households were not constrained and could choose both. Then we used the updated data from CFPS 2014, 2016 and 2018, used the universal two-child policy to ease the endogeneity issue of household decision-making, and conducted empirical tests on the theoretical model. The empirical results confirm the theoretical findings.


JEL:D91, D12, D31

【KeyWords】
Fertility Decision, Home-Buying Decision, Income Divergence