An economic analysis of Chinese fertility behavior

This paper is the first to present a Chinese general fertility model that simultaneously controls for the endogeneity of infant mortality and per capita income determination at county level. Using the 1982 Chinese population census data, comprising 2305 observational units, this analysis improves on existing studies in several ways. First, since all the underlying variables are measured at the Chinese county level, we treat both the per capita income and infant mortality rates as endogenous, as opposed to exogenous as assumed in most previous studies on Chinese fertility. Our testing results strongly reject the null hypothesis of the exogeneity of both infant mortality and income determination within our model. Secondly, concerning the hypothesis of nonlinear income effect on fertility behavior, we examine both the variable income-elasticity and constant income-elasticity models. Strong evidence is obtained in support of the variable income elasticity model, predicting a U-shaped income effect on Chinese general fertility. This suggests that a more equitable income distribution leads to a reduction in the Chinese fertility rates. Thirdly, employing the two stage least squares procedure, we find a much stronger positive replacement effect on infant mortality when the endogeneity of infant mortality and income are both controlled for simultaneously. Our results indicate that Chinese general fertility may well be shaped by optimizing behavior.