Intergenerational trade-offs under one roof: eldercare, children’s education, and public policy in China

This paper examines how three-generation households in China allocate limited resources between eldercare and children’s education. Using the 2022 China Family Panel Studies, we estimate a simultaneous equation model to measure the reciprocal substitution between eldercare and education expenditures while accounting for their joint determination. The results show significant bidirectional crowding out: higher eldercare spending reduces education expenditure, and higher education spending reduces eldercare expenditure. Public education spending and pension insurance mitigate this substitution by reducing private household burdens and shifting part of intergenerational support from families to public institutions. By examining expenditure decisions within three-generation households, this paper shows that public policy can ease intergenerational welfare competition in an ageing society.