From restriction to relaxation: The impact of fertility policy on household savings across countries

This paper presents a quantitative assessment of the impact of fertility policy adjustments on household saving rates using a panel data policy evaluation approach. We examine seven Asian regions that initially implemented restrictive fertility policies and later relaxed them, providing a unique empirical context for understanding the economic impact of such policy shifts. The analysis indicates that early restrictive fertility policies had a significant impact on the household saving rate, resulting in increases ranging from 4 to 21 % across countries. However, the subsequent relaxation of these policies had mostly insignificant effects on household savings rates, with the exception of Japan. Specifically, the implementation of fertility restriction policies in China, Hong Kong (China), Malaysia, and Singapore is associated with a 4 to 10 % increase in the household saving rate. In Korea, these policies lead to an increase of 18.3 %, and in Iran, the effect is most pronounced, with a 21 % increase in the household saving rate. In contrast, the relaxation of family planning policies in Japan resulted in a 6.4 % decrease in the household savings rate. These results provide new quantitative evidence on the impact of fertility on household saving rates, support the life-cycle theory of saving, and provide explanations for the differential impact of such policy adjustments.