Fertility Reduction on Population Trends, Living Standards, Capital Investment, and Economic Growth in China: A Quantile ARDL Approach

During the 1970s, China faced significant challenges due to rapid population growth, including poverty and poor economic management. To address these issues, the government implemented the “one-child policy.” However, by the 1980s, fertility rates had sharply declined, resulting in detrimental effects due to the continued implementation of the policy. In response, the “two-child policy” was introduced in 2015, but fertility rates continued to drop. The “three-child policy” was introduced in 2021 as additional reinforcement. The ongoing decline in fertility has negatively impacted the country’s economy by causing labor shortages, slowing population growth, accelerating improvements in living standards, and speeding up capital accumulation. Therefore, this study aims to empirically examine these assertions in China using data from 1979 to 2021, employing the innovative quantile autoregressive distributed lag (QARDL) model introduced by Cho et al., (Journal of Econometrics 188 1 281 300, 2015). The findings revealed that fertility reduction decreases the size of the Chinese population by 0.13% in the long run. Furthermore, it improves the standard of living for the Chinese people by 0.03% in the long run. Moreover, it has reduced the Chinese capital investment rate in both the short and long run by 0.93% and 0.50%, respectively. Finally, it encourages the growth rate of the Chinese economy by 0.38% in the long run. Based on empirical findings, this study will provide insights into population control strategies and guide future government family planning policies in shaping both the population size and economic growth in China.