Urban-rural equalization of basic public services, fertility behavior and growth

The equalization of basic public services is a central reform priority in China. This study develops a three-period overlapping generations (OLG) model with heterogeneous agents to examine how urban-rural equalization in pension subsidies and public education influences fertility behavior and economic growth. The results reveal pronounced asymmetries between urban and rural households. Equalizing pension subsidies increases fertility rate in rural areas but slightly reduces it in urban areas, whereas equalizing public education spending raises fertility rate and lowers private education investment among rural households, with opposite effects observed for urban households. Overall, these policies tend to expand population growth while slowing human capital accumulation, with public education equalization exerting a stronger aggregate impact than pension subsidies equalization. When equalization is achieved through expanded fiscal spending, both fertility rate and economic growth rate increase more significantly. These findings provide policy implications for optimizing basic public service reforms in dual-economy contexts.