Children as insurance revisited: Impact of children on private insurance adoption among older parents

Abstract

The old‐age security motive for fertility implies that children are substitutes for parents' old‐age insurance. However, demographic dynamics and the evolution of social welfare schemes may challenge this notion. Meanwhile, as population aging is placing heavy pressure on the social security systems, private insurance has become a crucial supplement for hedging risks. In light of the present trends, this research examines the impact of the number of children on private insurance adoption among older parents in China. This research exploits the “Later, Longer, Fewer” campaign to instrument variations in the number of children. Instrumental variable estimates reveal that the likelihood of older parents having private insurance increases with the number of children they have. The positive effect is more pronounced among older adults, who are less reliant on children and have more access to alternative resources. Further analyses indicate that adverse selection and information channels are potential mechanisms.