Why is the Sex Ratio Unbalanced in China? The Roles of the One-Child Policy, Underdeveloped Social Insurance, and Parental Expectations

Xue Li, University of Maryland

Using a calibrated life-cycle model, this paper examines the rising sex ratio in China through three linked but different perspectives: one-child policy, social insurance, and parental expectation. The benchmark calibration demonstrates that moving to a one-and-half-child policy would dramatically decrease the sex ratio at birth; if parents take the "can-not-marry" risk into consideration, the sex ratio will drop significantly with negligible change in population growth; and a universal social insurance only causes a small change in the sex ratio. I also investigate the equilibrium sex ratio, suggesting that publicity and education could help alleviate the sex imbalance. Similarly, I consider endogenizing children's transfer to parents and find that the equilibrium level is positively related to the attention parents place on grandparents' welfare. Finally, I show that if social insurance could change the social attitude on expected child transfer, then it has the potential to significantly reduce the sex ratio.