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Based on the 2018 China Health and Retirement Longitudinal Study (CHARLS 2018), from the perspective of urban-rural disparity, this paper investigates how fertility affects Chinese elders' health. We exploit the enactment of the one-child policy in 1979 to construct instrumental variables capturing the health effect of having only one child rather than multiple children. The empirical results show that the health condition of rural elders having only one child is worse than elders having multiple children, while the negative health effect of lower fertility becomes statistically insignificant for urban elderly parents. After considering the selection on both levels and gains, the results are still robust in marginal treatment effect (MTE) estimation. We investigate the potential mechanism in four ways, the results suggest that having only one child instead of multiple children depresses the upstream intergenerational transfer payments more for rural parents; ameliorates offspring's educational attainment more for urban parents; improves housing conditions more for urban elders; and decreases the visit frequency of children to both urban and rural parents. Our findings have important implications, in the context of increasing population aging, the urban-rural inequality caused by the hukou system has been magnified by the declining fertility rate. The Chinese government should pay more attention to rural elders with only one child, and more public-funded socioeconomic resources are needed for one-child parents in rural areas to improve their health. Moreover, the empirical results also imply that urbanization in China may be able to soften the health deterrent effect of lower fertility.

The Health Effect of the Number of Children on Chinese Elders: An Analysis Based on Hukou Category