1. Demographic transition and its dynamics in China
All countries undergo a demographic transition in which mortality rates typically go down first, followed by fertility rates that fall below the level of replacement because of the rise of individualism in the postmodern era (Landry, 1934; Notestein, 1945). This phenomenon is known as the second demographic transition (Van de Kaa, 1987).
According to Bloom et al. (1998) and Mason and Kinugasa (2005), countries that achieved economic prosperity after the Second World War typically went through three phases of demographic change. The first phase was the birth of the Baby Boomer generation, which occurred within 10-20 years after the Second World War. Incomes rising during the period of peace and delayed childbearing brought about an increase in births; together with reduced infant mortality it led to a rapid population growth. The second phase took place during the 1950s and 1960s, following the Baby Boomer generation. The advancement of birth control policies, or “family planning”, and increased education, especially for women, resulted in lower fertility despite rising incomes. The former babies became adults and entered the labour market, forming the workforce. In theory, there were more people in society capable of creating wealth, leading to faster GDP growth.
The third phase came 50-60 years after the birth of the baby boomer generation. Birth control policies and various other social and economic factors caused the younger generation to prefer smaller families, which led to further decline in the birth rate. As the first wave of Baby Boomers began to retire, the number of retirees exceeded the number of newly-born babies, and the proportion of the population in work decreased, reducing the supply of investment and further slowing down economic growth. That is, econo mic recovery and rising income of workers led to increased fertility. However, the implementation of birth control measures led to a decrease in fertility, directly causing a decrease in proportion of the labour force. As a result, fertility continued to decline, and an aging society emerged.
China’s demographic development is consistent with the theories of David and Mason (Jiang & Liu, 2016). After the founding of New China in 1949, economic boom led to rapid increase in the country’s birth rate. However, owing to family planning policies and the onset of demographic transition, people’s desire to have children noticeably diminished and China entered the era of an ageing society, with the demographic dividend gradually fading away (Liu, 2021; Kalabikhina & Kazbekova; 2022). According to the national census (Xue, 2021), China’s fertility rate continued to decline, with the total fertility rate falling to 1.18 in 2022 (World Bank data). This level was recognised as very low (Billari, 2005). China entered the period of the second demographic transition. The latest cens us data also show that the number and proportion of people in the working age group has decreased significantly, and the aging process has accelerated.
In response to the trends of ultra-low fertility and ageing of population, Lutz et al.(2006) proposed a low fertility trap theory. It provides an important perspective for research on low fertility and explains the three mechanisms that shape demography, sociology, and economics in the context of ultra-low fertility. In other words, once a country’s total fertility rate falls below 1.5, it becomes difficult to increase the fertility rate again. From a demographic perspective, low fertility rates lead to a decrease in the number of children, which in turn reduces the number of women of reproductive age, creating a vicious cycle. This will trigger significant changes in the overall population structure, turning the country into an ageing society. From a sociological perspective, Lutz et al. argue that individuals’ fertility preferences are influenced by actual fertility rates. If younger generations grow up in environments with fewer children per family, their ideal family size will also shrink under the influence of interpersonal interactions, thereby reducing the number of children they choose to have. Economic mechanisms show that the decline in fertility rates coupled with accelerated ageing presents an unfavourable outlook for economic development and social security. Younger generations may feel increased pressure and have lower expectations for future income, so they decide to have fewer children as a result. Wu Fan and Li Jianmin (2022) note that from a policy perspective, at least two strategies should be implemented to prevent a fertility crisis. These include eliminating the fertility deficit and encouraging people to have more children. We suggest that it is possible to create a better environment for people to have the children they want. It is also possible to change their reproductive attitudes towards increasing the number of children. The first strategy appears to be easier to implement, as it reduces the gap between the desired and actual number of children (Arkhangelsky, 2006). For a demographic policy to be effective, it is necessary to identify and mitigate factors that negatively affect fertility, as well as the ability to reach the desired fertility level.
2. Factors of fertility reduction
Gary Becker’s work (1960) was among the earliest to explore the economic aspects of human reproductive decisions. He saw children as a durable good, assuming that when parents decide to have a child, they are choosing between a child and other goods, while acting within a budget and focusing on a specific utility function determined by factors such as culture, religion, and age. Leibenstein (1981) conducted a more comprehensive and systematic analysis of childbearing decisions in families. He considered the birth of a child and a number of subsequent events as economic implications for parents: as parents incur certain costs when having a child, these costs should be balanced against their effects. Li et al. (2009) conducted a study on women’s reproductive behaviour and found that when couples or women of reproductive age have their first child, it is mainly to satisfy their spiritual needs. And when they need to have a second child or more children, the cost of bringing up a child becomes a factor in making such a decision. Liang et al. (2022) also calculated the cost of raising children. In today’s China, the average cost for a young couple to raise a child until the age of 18 is 485,000 RMB, according to statistics from relevant institutions. This amount continues to increase, with the national average annual cost now standing at 26,944 RMB per year (equivalent to 485,000 over 18 years).
Therefore, parents’ willingness to have children is influenced by the balance between the benefits and costs associated with having children. According to Chen Jiaju and Zhai Zhenwu (2016), political, socio-economic, and personal factors all influence parents’ decision to have children.
Chen Wei’s study (2021) confirms the positive impact of the repeal of the population control policy on people’s desire to have children. The two-child policy has led not only to an increase in the number of second births, but also to a significant rise in the number of third and subsequent births. Compared to 2013, when the one-child policy was ended, the increase was significant. However, the effect of the policy is not permanent and there are other factors that influence people’s willingness to have children. For example, socio-cultural and economic factors may be more important than population policies (Lieming et al, 2022). These two groups of factors determine reproductive behaviour.
Yingchun and Zhenzhen (2018) analysed women’s willingness to have children from the perspective of personal development and found that after the population policy reform, women have struggled to balance work and family. The contradiction between work and child-rearing has become more apparent. The family pattern (the degree of gender equality in the household) has become the main factor influencing women’s willingness to have children.
Xue (2021) confirms that the female labour force participation rate negatively affects the fertility rate in China. In other words, the higher a woman’s participation in the labour force, the lower the fertility rate will be. Today, in the absence of gender equality within the family where only women are responsible for bringing up children, fertility rates will decline. Since the influence of social and cultural factors may be stronger than that of economic rationality, even if women’s wages are higher or the labour force participation rate is higher, women usually have to do more housework and also care for children and the elderly (Kalabikhina, 2021). Moreover, given the gender discrimination in the workplace, women are forced to choose between having children and working, which also makes women more reluctant to have children.). Therefore, with gender discrimination in the home and in the workplace, there is a negative correlation between the level of labour force participation and decisions to have children, especially higher-order children, second- and third-born.
Some researchers have also studied the influence of education level on reproductive behaviour. According to Becker’s theory and the findings of modern researchers, educated women have a higher opportunity cost of having a child. Therefore, they refuse to have children, especially of higher order, and/or delay marriage and childbirth for economic reasons (Zhuravleva and Gavrilov, 2017). On the other hand, a highly educated women has a high chance of meeting a highly educated man. (Oppenheimer, 1994) This increases the likelihood of having children immediately after graduation, because, first, a partner’s education provides a high income, and second, women with a higher education have more power in the household and are able to divide household responsibilities equally. This reduces the burden of domestic work on women. There is no consensus in the empirical literature on the relationship between female education and fertility (Kim, 2023).
Yang (2022) analysed the impact of urbanisation on fertility from the perspective of social development. He believes that improving urban conditions will change young people’s ideas about fertility. In the past, large rural households believed that the more children a family had, the happier they were, but now, more and more people favour having fewer children, so that parents can devote more time and energy to each child and ensure that their human capital is greater.
Zhenzhen (2021) analysed the factors that influence fertility from an economic perspective. She found that the current high housing prices affect young people’s desire to have children, increasing pressure on them and making it difficult to afford having children. She also analysed the economic development factors that affect young people. In more economically developed areas, young people have more job opportunities and career prospects, which contributes to their desire to have children. However, the pace of life in these areas is more intense, leaving young people with fewer resources to support children.
In addition to socio-economic and political factors, researchers also examine the demographic aspect. Among the determinants of fertility explored by V. N. Arkhangelsky (2006), we would like to highlight the influence of the need for children. If data are available, it would be most promising to take a separate look at people with more or less positive attitudes toward having children. Other demographic factors, such as the shift in the age of first births and the gender imbalances in the marriage market, may also have an impact on fertility.
Building on the work of previous researchers and using available regional data from all provinces of China, this paper examines the following socio-economic factors: the number of years of education per person, the female labour force participation rate, the housing price-to-average income ratio (which measures the affordability of housing), the level of urbanization, and the gross regional product per person. We pay special attention to housing affordability because housing prices have increased significantly in China in recent years. The average price per square meter in 2001 was RMB 2,000, but by 2022 it had risen to RMB 9,700. This is a five-fold increase compared to 20 years ago, and the average annual growth rate is 8.5%. Housing prices continue to rise in some major cities, especially those where young people live. For example, in Shenzhen, the average housing price in 2001 was 5,531 RMB per square metre, while the average housing price in 2022 was 54,368 RMB per square metre, a ten-fold increase!
Rising housing prices increase pressure on young people, affecting the willingness of women of reproductive age to have children. In our study, we not only study housing prices, but also look specifically at affordability of housing: the ratio between province-level house prices and average income. We do not have regional data on childbearing needs, nor do we model population policy factors, including at the provincial level. Their effects will be captured using a fixed effects model: we believe that this model will give the best results in estimating the determinants of fertility based on province-level data. Our focus is on socioeconomic factors that influence fertility.
At present, research on fertility has mainly concentrated on the study of variations in fertility, but very few quantitative studies explored the factors that influenced fertility in different provinces. This paper uses regional panel data to explore the reasons behind the low birth rates in China and to quantitatively analyze the selected factors.