The impact of access to credit and capitalmarkets on fertility: Evidence from China

Abstract

Based on the micro-financial perspective of optimizing household
resource allocation, combined with Becker’s family theory, this paper
examines the impact of broader access to credit and capital market on
household decisions with respect to the number of children by constructing a revised four-period life cycle model. The results show that loosening borrowing constraints significantly promotes the fertility rate, while opportunities for financial investment inhibits the fertility rate. We find that disposable income weakens the direct positive impact of credit quota and promotes the direct negative impact of on fertility. The excessive consumption of households strengthens credit constraints and encourages household consumption, which accelerates a crowding out effect on fertility. In addition, endowment insurance prompts households’ investment in the capital market, which suppresses reproductive behavior. Furthermore, credit constraint increases fertility by raising housing prices, while investment opportunities crowd out fertility by raising housing prices. There are differences in the impact of credit constraints and investment opportunities on fertility for different levels of households income.