Abstract: The Chinese government implemented the One Child Policy (OCP) in an attempt to ameliorate the population explosion and its potential negative economic consequences on their infant economy in 1979. Here the consequences of this policy for marital matching and family size decisions are examined. A simple General Equilibrium model demonstrates how constraints on marital output on the quantity of children dimension raises the marginal benefit of increased positive assortative matching, and greater investment in children. These theoretical predictions are examined empirically in a variety of ways. The prediction of intensified positive assortative matching was examined using Distributional Overlap and Stochastic Dominance Tests and provided support for intensified assortative matching amongst the urban population. To support this positive finding, we next examined if the policy was indeed binding. The extent to which parental family size decisions were bound by the OCP were examined using Poisson regression techniques and the results suggest that the OCP principally affected the quantity of children decision by suppressing parental preference for male heirs and they suggest that after the OCP was implemented births beyond the first child are purely accidental among younger mothers. In addition, we also found some evidence of increased educational attainment among children reflecting increased parental investments in children post OCP further supporting the view that the One Child Policy altered significantly familial decisions in urban China.
Keywords: Family Formation, Rationing, Matching
JEL Classification: J12