How does one child policy influence Chinese household saving behavior

This paper investigates the influence the decline in the family size on household size through a Chinese family planning policy, the One-Child Policy (OCP). I find the evidence of the negative effect at the micro level using Chinese household survey data. I also study the aggregated effect using Chinese provincial level data. With the concern of endogeneity, I use a two-stage least square regression with financial punishments for having more than one child and share of population that were exempted from the restriction as instruments for the fertility variable. This regression shows a positive impact of the implementation of the OCP on household saving rate. The empirical result indicates that the decline in the share of population under 20 can explain 40 percent of the observed increase of the Chinese household saving rate in the last thirty years.