Stepping Down from Life-long Posts : Layoffs, Fertility, and Educational Attainment in Urban China

We analyze how layoffs affect child quantity and quality, by exploiting the downsizing of China's state-owned enterprises between 1995 and 2004. It induced a layoff of more than 47 million workers who had previously held permanent jobs. Difference-in-differences estimates indicate that layoffs increased birth rates by around 3.6‰, driven mainly by layoffs of female workers. This occurs on two margins: 1) the extensive margin: women's selection into earlier motherhood; and 2) the intensive margin: the increased births of subsequent children. We also find that the layoffs reduced children's educational attainment, driven by two mechanisms: 1) negative parental selection: women with lower socioeconomic status are more likely to increase fertility during layoffs, compared with others; and 2) reduced educational investments during schooling. This evidence suggests that negative income shocks affect both the size and quality of the involved cohorts