Estimating a Dynamic Model of Sex Selection in China

High ratios of males to females in China have historically concerned researchers (Sen 1990), and have increased in the wake of China's One Child Policy (1979). Chinese poli-cymakers are currently attempting to correct the imbalance in the sex ratio through initiatives which provide nancial compensation to parents with daughters. Others have advocated a re-laxation of the One Child Policy to allow more parents to have a son without engaging in sex selection. In this paper, I present a model of fertility choice when parents have access to a sex selection technology and face a mandated fertility limit. By exploiting variation in nes levied in China for unsanctioned births, I estimate the relative price of a son and daughter for mothers observed in China's census data (1982-2000). I nd that a couple's rst son is worth 1.42 years of income more than a rst daughter, and the premium is highest among less educated mothers and families engaged in agriculture. Simulations indicate that a subsidy of 1 year of income to families without a son would reduce the number of "missing girls " by 67 percent, but impose an annual cost of 1.8 percent of Chinese GDP. Alternatively, a 3-child policy would reduce the number of "missing girls " by 56 percent but increase the fertility rate by 35 percent