Essays in family and labour

economics

Yiyang Luo

A thesis submitted for the Degree of

Doctor of Philosophy

Department of Economics

University of Essex

February 2017

mailto:yluoe@essex.ac.ukhttp://www.essex.ac.uk/economics/http://www.essex.ac.uk/

Contents

Contents i

List of Figures iv

List of Tables vi

1 On Welfare or In Work: Perspective from Single

Motherhood and Early Childhood Outcomes 1

1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.2 Policy Background and Literature Review . . . . . . . . . . . . . 5

1.2.1 Policy Background . . . . . . . . . . . . . . . . . . . . . . 5

1.2.2 Literature Review . . . . . . . . . . . . . . . . . . . . . . . 8

1.3 Econometric Method . . . . . . . . . . . . . . . . . . . . . . . . . 11

1.3.1 Contemporaneous Specification . . . . . . . . . . . . . . . 14

1.3.2 Cumulative Specification . . . . . . . . . . . . . . . . . . . 14

1.3.3 Value Added Specification . . . . . . . . . . . . . . . . . . 15

1.3.4 Cumulative Value Added Specification . . . . . . . . . . . 16

1.4 Data Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

1.5 Empirical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1.5.1 Main Specifications . . . . . . . . . . . . . . . . . . . . . . 20

1.5.2 Model Selection . . . . . . . . . . . . . . . . . . . . . . . . 23

1.5.3 Robustness Check . . . . . . . . . . . . . . . . . . . . . . . 24

1.5.3.1 Alternative Definition of Groups . . . . . . . . . 24

1.5.3.2 Child Fixed Effects . . . . . . . . . . . . . . . . . 26

i

1.5.3.3 Mechanism . . . . . . . . . . . . . . . . . . . . . 26

1.5.3.4 Difference-in-difference Estimations . . . . . . . . 28

1.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

2 Is the Quantity-quality Trade-off Real? Quasi-

experimental Evidence from China 54

2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

2.2 Institutional Background and Literature Review . . . . . . . . . . 60

2.2.1 Policy background . . . . . . . . . . . . . . . . . . . . . . 60

2.2.2 Literature Review . . . . . . . . . . . . . . . . . . . . . . . 60

2.3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

2.3.1 Instrumental Variables . . . . . . . . . . . . . . . . . . . . 64

2.3.2 Rationale for Using Non-linear Model . . . . . . . . . . . . 66

2.3.2.1 Graphic Evidence . . . . . . . . . . . . . . . . . . 67

2.3.2.2 Econometrics Reasoning . . . . . . . . . . . . . . 69

2.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2.5 Empirical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

2.5.1 At Least One Birth Sample . . . . . . . . . . . . . . . . . 73

2.5.2 At Least Two Births Sample . . . . . . . . . . . . . . . . . 75

2.5.3 At Least Three Births Sample . . . . . . . . . . . . . . . . 76

2.5.4 Robustness Check . . . . . . . . . . . . . . . . . . . . . . . 77

2.5.4.1 Instruments Validity . . . . . . . . . . . . . . . . 77

2.5.4.2 Heterogeneous Effects . . . . . . . . . . . . . . . 80

2.5.4.3 One Child Policy . . . . . . . . . . . . . . . . . . 82

2.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

3 No Retirement Consumption Puzzlethe Effect of

Labour Supply on Disaggregated Expenditures in the

Later Life Cycle 107

3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

ii

3.2 Background Information and Literature Review . . . . . . . . . . 112

3.2.1 Institutional Background . . . . . . . . . . . . . . . . . . . 112

3.2.2 Literature Review . . . . . . . . . . . . . . . . . . . . . . . 113

3.3 Empirical Methodology . . . . . . . . . . . . . . . . . . . . . . . . 115

3.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

3.5 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

3.5.1 Empirical Patterns . . . . . . . . . . . . . . . . . . . . . . 121

3.5.2 Main Results . . . . . . . . . . . . . . . . . . . . . . . . . 122

3.5.3 Robustness Check . . . . . . . . . . . . . . . . . . . . . . . 124

3.5.3.1 Bandwidth Choice . . . . . . . . . . . . . . . . . 124

3.5.3.2 Alternative Specifications . . . . . . . . . . . . . 125

3.5.3.3 Placebo Test . . . . . . . . . . . . . . . . . . . . 125

3.5.3.4 Heterogeneity . . . . . . . . . . . . . . . . . . . . 126

3.5.3.5 Measurement of Expenditure . . . . . . . . . . . 127

3.5.4 Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . 128

3.5.4.1 Family Structure . . . . . . . . . . . . . . . . . . 128

3.5.4.2 Elderly Support . . . . . . . . . . . . . . . . . . . 129

3.5.4.3 Intra-household Time Allocation . . . . . . . . . 129

3.5.4.4 High household saving rate . . . . . . . . . . . . 130

3.5.4.5 Unexpected Retirement . . . . . . . . . . . . . . 131

3.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

References 161

iii

List of Figures

1.1 Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

1.2 Mothers Working Status by Group . . . . . . . . . . . . . . . . . 50

1.3 Child Outcome Gap by Group . . . . . . . . . . . . . . . . . . . . 51

1.4 Robustness Check: Alternative Definition of GroupsMothers

Working Status by Group . . . . . . . . . . . . . . . . . . . . . . 52

1.5 Robustness Check: Alternative Definition of GroupsChild Out-

come Gap by Group . . . . . . . . . . . . . . . . . . . . . . . . . 53

2.1 First Stage Effects on Fertility . . . . . . . . . . . . . . . . . . . . 101

2.2 The Mean-variance Relationship for Families with Children . . . . 102

2.3 Model Fitting in Two Stages 1/2 . . . . . . . . . . . . . . . . . . 103

2.4 Model Fitting in Two Stages 2/2 . . . . . . . . . . . . . . . . . . 104

2.5 Model Fitting in One Step 1/22SLS VS. GMM . . . . . . . . . 105

2.6 Model Fitting in One Step 2/22SLS VS. GMM . . . . . . . . . 106

3.1 Life Cycle Pattern of Total Non-durable Expenditure . . . . . . . 150

3.2 First StageThe Effect of Mandatory Retirement Age on Retirement151

3.3 Balance TestThe Effect of Retirement on Predetermined Variables152

3.4 Reduced FormThe Effect of Retirement on Main Expenditure

Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

3.5 Robustness Check: Quadratic Polynomial Regressions the First

Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

iv

3.6 Robustness Check: Quadratic Polynomial Regressions Balance

Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

3.7 Robustness Check: Quadratic Polynomial Regressions Reduced

Form Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

3.8 Mechanism: Household Composition and Family Transfer . . . . . 157

3.9 Mechanism: The Fraction of Retirees in the CHNS Sample . . . . 158

3.10 Mechanism: Food Shopping Time in the CHNS Sample . . . . . . 159

3.11 Mechanism: Food Preparing Time in the CHNS Sample . . . . . . 160

v

List of Tables

1.1 Working Family Tax Credit (WFTC) Rule . . . . . . . . . . . . . 32

1.2 Working Tax Credit and Child Tax Credit (WTC/CTC) Rule . . 33

1.3 Summary Statistics by Child Age and Group . . . . . . . . . . . . 34

1.4 Transition Matrix of Working Status across Time . . . . . . . . . 35

1.5 The Determinates of Working Status Transition . . . . . . . . . . 36

1.6 The Effect of In-work Benefit Reforms on Childrens Cognitive

Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

1.7 The Effect of In-work Benefit Reforms on Childrens Non-cognitive

Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

1.8 Model SelectionA Cross-Validation Approach . . . . . . . . . . 39

1.9 Robustness Check: Alternative Definition of GroupsFixing

groups at the first wave1 . . . . . . . . . . . . . . . . . . . . . . . 40

1.10 Robustness Check: Alternative Definition of GroupsEducation1 41

1.11 Robustness Check: Child Fixed Effects Estimation . . . . . . . . . 42

1.12 Mechanism: Treatment Effect through Childcare Usage and Family

EnvironmentFirst Control Group . . . . . . . . . . . . . . . . . . 43

1.13 Mechanism: Treatment Effect through Childcare Usage and Family

EnvironmentSecond Control Group . . . . . . . . . . . . . . . . 44

1.14 Mechanism: Treatment Effect through Income Channel . . . . . . 45

1.15 Mechanism: Treatment Effect through Working Hour Channel . . 46

1.16 Robustness Check: the Effect of 30 hour Element of the In-work

Benefit Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

vi

1.17 Robustness Check: Consistency of WFTC and WTC/CTC reform

effectsDifference-in-difference Estimations . . . . . . . . . . . . 48

2.1 Relevant Test: First Childs Gender . . . . . . . . . . . . . . . . . 86

2.2 First Stage Effects on Fertility . . . . . . . . . . . . . . . . . . . . 87

2.3 Descriptive Statistics by Sample 1/2 . . . . . . . . . . . . . . . . 88

2.4 Descriptive Statistics by Sample 2/2 . . . . . . . . . . . . . . . . 89

2.5 The Effect of Family Size on Education Outcome . . . . . . . . . 90

2.6 Testing the Internal Validity of Instruments Birth Spacing . .