The effect of the universal two-child policy on female labour market outcomes in China

Abstract To alleviate the imbalance in demographics, the Chinese government initiated the universal two-child policy nationwide in 2016, which has comprehensively impacted society, especially females. Our study investigates whether this policy has negatively affected workforce employment and income among women in urban areas. Based on the DID (difference-in-differences) method and the Heckman Two-Step Estimation, reliable empirical evidence shows that the universal two-child policy has significantly reduced women’s employment by 4.06% and decreased their labour income by 10.43%. Surprisingly, this policy has decreased the employment among women under 25 years old by 23.99% and has reduced the income of higher educated females by 29.59%. Furthermore, we find that the influence of the universal two-child policy on female employment has gradually increased from 2016 to 2018, and its impact on income has presented an evident time lag.