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▼a This dissertation investigates two decision-making processes common to modern Chinese households.In the first chapter, I study how rural-to-urban migration in China affects households' inter-generational behavior, and the effects of policies targeting migrant households on their welfare. Internal migration from rural to urban areas can have significant welfare effects on migrants and their extended families. In China, migration is often temporary, and most family members of migrant workers are left behind. In these households, many left-behind grandparents look after the children of migrating parents. However, the behavioral and welfare effects of government policies directed towards rural households with potential migrants remain unknown.Using five Chinese data sets on the migration patterns, education choices, financial transfers, and health of multi-generational families, I first present a rich set of stylized facts about migration and household behavior. The evidence shows that in many rural households, parents migrate to urban areas for work when healthy grandparents are able to provide childcare. When the grandparents are sick, migrating parents return to the rural area to provide elder care and pay for their parents' healthcare. With the facts as a guide, I develop and estimate a structural model of the behavior of migrants and their families. The model features an informal limited-commitment contract over child care, financial transfers, and elder care. Parents and grandparents play a sequential game by choosing migration status, informal contract status, remittances, children's education, and grandparents' healthcare. The estimates suggest that poor households adopt the informal contract so that rural consumption, education, and healthcare are funded by the migrants' remittance.I then use the model to evaluate the effects of a set of hypothetical government policies. An urban education subsidy promotes children's education, increases the migrants' consumption in the urban area, and does not affect the grandparents' welfare. But it does not alleviate the problem of children left behind as the government had hoped. An improved insurance coverage that lowers out-of-pocket healthcare costs would reduce the grandparents' demand for the informal contract. It would generate a welfare gain to the grandparents, discourage parents' migration, and increase children's education. The policy counterfactual outcomes imply that policies intended to improve the welfare of one family member can affect the welfare, consumption behavior and migration decisions of all three generations by altering intra-household cooperation. The design of these policies should account for intra-household responses.In the second chapter, I exploit a change in Beijing's primary school admissions policy in 2014 to estimate parents' willingness to pay for primary school quality. The new policy required primary schools to admit students from their assigned neighborhoods without admission exams. I estimate the magnitude of the parents' willingness to pay for educational quality through the change in relative housing prices. I use three identification strategies to distinguish the value of school quality from the value of other local public goods. First, I employ a difference-in-differences analysis to estimate the changes in prices using all houses in Beijing. Second, I combine the diff-in-diff approach and Black (1999)'s boundary discontinuity design to estimate the value of education quality using the subsample of houses near the school district boundaries. Third, I compare the policy effects on sales prices with effects on rents, exploiting the fact that the location of a rental unit does not determine school assignment. I find that parents' additional willing to pay for a flat in the top 5% of school districts ranges between $24,452 and $54,186. These revealed valuations for high quality schools are large, particularly compared to the average monthly income of $1,068 in 2014. |