An empirical study on the effect of child dependency ratio on household consumption—Focusing on the “two-child policy” from 2016

With the new normal development model proposed, China is exploring a paradigm shift from investment-driven economic growth to domestic demand-driven economic growth. At the same time, in response to the aging process of the population, the Chinese government introduced a universal two-child policy in 2016. This paper analyses the impact of the two-child policy on the average propensity to consume in the household sector. In conclusion, the young-age dependency ratio inhibits the household's consumption, which is inconsistent with the implications of the life-cycle hypothesis. The reason is that Chinese families have a strong propensity to save, aiming for house purchasing and children’s education in the future.