The Causal relationship between fertility and labor force participation decisions of female in China

Abstract

As China's aging population and labor force shrinkage threaten its demographic dividend that fueled rapid economic development, examining the relationship between female fertility decisions and labor force participation has become crucial. This study investigates the causal relationship between fertility and labor force participation decisions of females in China using data from the China Labor Dynamics Survey (CLDS). The non-parametric identification of causal effects is addressed without making assumptions on the functional form or distribution in the structural causal model (SCM). The do-operator is used to test for non-parametric causal effects. To further validate the results, the multinomial treatment model(MTM), a parametric approach, is also employed to estimate the causal effect between fertility and female labor force participation decisions. The findings reveal a bidirectional relationship between women's employment status and their fertility decisions. Women working in agriculture are 8.77% more likely to have two or more children compared to women not in the labor force, while those in non-agricultural sectors tend to have fewer children. Having more children also increases the likelihood of working in agriculture (up to 17.91% for 3 children) but decreases the probability of non-agricultural work (up to 17.6% for 4 or more children). The MTM model supports these non-parametric estimates, showing that women in non-agricultural sectors have fewer children, while higher fertility rates are associated with increased likelihood of both agricultural and non-agricultural work. These results suggest that tailoring employment policies to different sectors, particularly by enhancing opportunities and working conditions for women in non-agricultural jobs, could effectively address the current low fertility rate while promoting women's workforce participation.