The Long-run Impact of Changing Fertility in China Preliminary draft. Please do not quote. Neha Bairoliya * nbairoli@hsph.harvard.edu David Canning †* dcanning@hsph.harvard.edu Ray Miller * hrmiller@hsph.harvard.edu Akshar Saxena † aks511@mail.harvard.edu March 4, 2016 Abstract We assess the impact of continued low fertility in China, versus the rebound in fertility towards replacement levels predicted by the United Nations, on steady state macroeconomic outcomes in a dynamic general equilibrium framework. We allow for public health insurance, pensions, private savings, and intra-family transfers to support the consumption of the elderly. Continued low fertility has two negative effects on per capita income in our model—a rise in old-age depen- dency ratios and higher taxes to pay for public old-age pensions and healthcare. We find, however, that these negatives are more than offset by an increase in output per worker due to increased accumulation of both physical and human capital. Lower fertility induces larger investments in human capital per child and also encourages workers to save for retirement rather than rely on their chil- dren for old-age support. We conclude that continued low fertility would lead to higher per capita income, consumption, and economic welfare than would be the case with a rebound in fertility. JEL classifications: E62, H55, I13 Keywords: China, health, aging, fertility, human capital * Harvard Center for Population and Development Studies, Cambridge, MA, 02138 † Harvard School of Public Health, Boston, MA 02115 1