Labor Supply and Family-Planning Policy in Rural China

Economic reform has brought marry changes to China's rural economy in the past two decades, as reflected in a combination of rapid economic growth, rural industrialization, structural change, and sharp reductions in fertility. This dissertation evaluates the possible consequences of these changes on women's labor force participation. The first essay explores the impact of China's "one-child policy" on female work patterns through its possible effects on fertility. Early studies that took fertility behavior to be exogenous to female labor supply tended to find that fertility has a negative impact on female labor supply. This ignores a potential selection problem inherent in the estimation of the fertility-female labor supply relation, namely, that women who prefer to work may also desire fewer children. I use the instrumental variable method identifying variables that correlate with fertility but have no direct impact on labor supply to resolve this problem. Two instrumental variables, local family-planning rules and the sex of the first-born child, are identified. Using the sex of the first-born child as an instrument, I find that the negative correlation that exists between fertility and labor supply in the baseline OLS estimation disappears, suggesting that the negative correlation between fertility and female labor supply decisions is a product of sorting. Motivated by the observation that the implementation of the family-planning policy varied from one village to another, the second essay explores the determinants of family policy and its corollary; the optimal level of cash penalties. To achieve this, I use a panel dataset and implement estimation strategies to account for possible biases attributable to the unobserved differences in village characteristics. The main findings are that family-planning rules are correlated strongly with geographical locations, whereas the level of cash penalties is determined by local income variations. The third and final essay explores the economic role of women in a broader perspective. This I do by estimating the relationship between economic growth and the relative contributions of men and women to family labor supply and incomes. The main challenge in the empirical work is the measurement of individual earnings given that most earnings are reported at the household level. I find that while both men and women are moving out of agriculture, men move out at a much faster pace, and consequently, their relative contribution rises with the level of economic development. I find that agriculture remains an important relative and absolute source of income for women.

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