Enforcing Government Policy: Privatization and the Weakening Effects of China’s One-child Policy∗

I evaluate the role of China’s privatization of the economy in weakening the effects of the birth control policy, known as the one-child policy in the West, during the last three decades. State-owned enterprises or other state-owned organizations (SOEs) imposes more control over individual choices and hence represents increased state capacity (Acemoglu et al., 2015). The baseline OLS regressions show that compared to those not working in a SOE, the number of children for individuals working in a SOE is 0.1 lower on average. In other words, if the individuals not working in SOEs came to SOEs, we would probably lose 10 children for each one hundred of them. To deal with the selection issue, I use father’s SOE status as an instrumental variable. The 2SLS results show a much larger difference in the number of children: 0.4. The existence of positive selection and the reduction in bias from job type switches probably rationalize the larger 2SLS results. Furthermore, Probit regressions give a strong negative impact of working in SOEs on the probability to have more than one child. These results imply that the birth control policy might already lead to an even lower fertility rate in China without privatization. ∗I am indebted to Daniel S. Hamermesh, Kishore Gawande and Michael Geruso for their guidance and support. I am also grateful to Yan Dong, Shihe Fu, Sukjin Han, Robert Jensen, Han Li, Leigh Linden, Xiaobo Lu, Xin Meng, Richard Murphy, Stephen J. Trejo, Xiao Wei, Emily Weisburst, Haiqing Xu, Yang Yao and participants in 2016 AEA annual meeting, 2015 China Economics Annual Conference, Southwestern University of Finance and Economics and UT-Austin Public/labor seminar for helpful comments and discussions. The main data used in this paper were collected by the research project “Chinese General Social Survey (CGSS)” carried out by the National Survey Research Center, Renmin University of China (NSRC). The author appreciate the assistance in providing data by the institutes and individuals aforementioned. The views expressed herein and the possible errors are the author’s own. †Department of Economics, University of Texas at Austin. E-mail address: [email protected]