The quantity-quality trade-off related to investment in healthy human capital: New evidence from the implementation of the "selective two-child policy" in China

Using data from China Family Panel Studies (CFPS), and employing the "selective two-child policy" as a quasi-natural experiment, this study provides empirical evidence of Becker's quantity-quality tradeoff theory. We find that the selective two-child policy reduced households' investment in health insurance for their first-child. The proportion of participated families and the amount invested in health insurance declined significantly among families in which one spouse was an only child. The reduction in investment in health insurance was more substantial when the first-child was a girl and when the first-child was younger. One likely mechanism was the wage penalty for motherhood. The relaxed birth policy led to a significant reduction in women's income. As a result, households' financial resources became more limited, and their budgets became tighter, leading to reductions in investments in the health of first-child.