Essays on applied microeconomics

Abstract

This thesis comprises three essays within the field of applied microeconomics, with a focus on policy evaluation in China. The first chapter investigates the effect of the 2014 Selective Two Child Policy in China on fertility and labour market outcomes for women with an urban household registration status. This policy allows couples to have a second child if either spouse is a single child. Using survey data from the China Family Panel Studies and a difference-in-differences approach, I find that the change in birth quota does not lead to an increase in fertility in the years 2014 and 2016. This result is unlike what was previously found in the literature. I argue that properly accounting for differences in age, a key determinant of fertility, between those affected and unaffected by the policy is crucial in this setting, as eligibility is more frequent among younger couples, likely due to the previous implementation of the One Child Policy in 1979. Even without affecting realized fertility, this policy could affect labour market outcomes through expected fertility. However, my results suggest that the overall effect on female labour outcomes in the short run is negligible, particularly in the extensive margin. As the One Child Policy was gradually relaxed over time, more people would have an opportunity to have a second child. Therefore, the second chapter investigates how sibling gender composition affects women’s educational attainment and occupational choice. Using the China Household Income Project survey data, I estimate the impact, for first-born women, of having a second-born brother relative to those with a second-born sister. Given supportive evidence from the literature and my data, I identify a period (1963 to 1978) where the gender of the second child given the first child’s gender is as good as random as it is not yet affected by selective abortion or other drivers of gender imbalance. The results show that having a second-born brother is beneficial to first-born women’s educational attainment. However, other elements such as gender norms appear reinforced by having a brother: in the labour market, first-born women with a second-born brother are less likely to choose a male-dominated occupation, which on average carries a higher wage. In the third chapter, I conduct an extensive analysis of the effect of an education expansion on intergenerational mobility. The 1986 Compulsory School Law in China mandated the need to complete 9 years of education. The temporal and geographical variations in the policy implementation allow me to use a difference-in-differences approach.

I find that even though the Compulsory Schooling Law increased schooling by 0.5 years on average, the correlation between education of father and child appears unaffected by the policy. While the policy increases the probability of children with a less well-educated father finishing 9 years of education, it also makes children with a well-educated father more likely to complete 12 years of education, hence leaving mobility unaffected. Furthermore, I look at the effect of the policy on assortative mating and the correlation in education between the father and spouse of the child. My results show that the policy also has no effect along this dimension. On the other hand, I find having eligible siblings significantly decreases one’s education and increases intergenerational education persistence, suggesting negative externalities within the household.