One Child Policy: Bane or Boon?

While assume think high birth rates will help boost a country’s economic growth, researchers in CUHK Business School think otherwise

By Louisa Wah Hansen

Economists inside and outside the country have warned that the One Child Policy could lead to a shortage of workers, which might threaten China’s economic growth as the population ages rapidly. However, the contrary has been found in a research paper by CUHK economics Professor Zhang Junsen and Professor Li Hongbin, titled “Do High Birth Rates Hamper Economic Growth?”

The research, spanning two decades from 1978 to 1998 and covering 28 Chinese provinces, found that the lower the birth rate, the faster the economic growth. The annual growth rate of the real per capital income during this period was as high as 8.1 percent. At the same time, the birth rate was very low — at only 2 percent.

According to Prof. Zhang, the research found that the higher the birth rate, the slower the economic growth; and that it is obvious that the One Child Policy has a negative effect on the birth rate. The study concludes that the policy has a positive effect on economic growth.

“According to the study, the One Child Policy did contribute to China’s economic growth from the time it started all the way until 1998, the end of the study period,” says Prof. Zhang. However, he cautions that the positive effect of the One Child Policy on the economy should not be overstated.

“This is a mild inference from the paper, and should not be taken too seriously,” Prof. Zhang emphasizes. “The paper is not a study on the One Child Policy’s impact on economic growth. It does not explicitly analyze that. We would need a separate study to do that.”

But still, the connection is there. How did the One Child Policy could contribute to the increase in economic growth?

“Lower fertility leads to a higher level of schooling per child and increases parental labor supply. It may also facilitate parental migration, thus enabling the reallocation of the labor force from rural to urban areas,” he says.

While economists have warned about the possibility that a shrinking population could affect China’s economic growth negatively, Prof. Zhang believes that such a view is limited in its scope.

“People often cite the vanishing population dividend. Such a view largely ignores the points I made above. What matters most is the quality of the population, not merely the quantity,” he says.

Prof. Zhang explains that economic growth depends more on the quality of the population than the quantity: “High quality people are most important for innovations and creations, which are crucial for sustained economic growth.”

As to whether the One Child Policy will eventually be phased out, Prof. Zhang thinks the answer would be ‘yes’.

“But the real question,” he says, “is its timing and how to phase it out. It’s a very complicated issue. I believe that many people in the urban areas may want one child even if they are allowed to have two.”

“One noteworthy issue is: The new government is pushing for urbanization and fairness, so rural migrants may fully become urban residents. However, they have often been allowed to have two children, whereas those who are currently urban residents are allowed only one. So there seems to be some unfairness,” says Prof. Zhang.

He says it seems that the problem has not yet been noted by anyone so far, and urges the Chinese government to quickly come up with a solution to accommodate the scenario where urban residents can have a second child.