The Dynamic Impact of Having a Second Child on Females' Workforce Participation: Evidence from China's Universal Two-Child Policy

Abstract

The impact of family size on female participation in the labor market has long intrigued economists, with inconclusive findings. This paper examines the dynamic effect of having a second child on female workforce participation in China by utilizing the 2015 universal two-child policy as a quasi-natural experiment. Using data from the China Family Panel Studies and employing the difference-in-differences model, this study found that for policy-targeted women, the net effect of having a second child on their workforce participation was insignificant following the policy's implementation. However, upon further exploration of the time-varying effect, it was discovered that in the first two years after they gave birth, policy-targeted women were significantly less likely to enter the workforce due to child-care needs. However, influenced by increased household economic pressure, the likelihood of women entering the workforce increased significantly in the fourth year after giving birth. These results indicate that the effect of a second child on female workforce participation was not uniform and displayed temporal variability. This study enriches the existing literature on how family size affects female workforce participation and contributes to a deeper understanding of the effects of relaxed fertility policies.