Fertility Regulation, Fiscal Feedback, and Earnings Inequality

How does price‐based fertility regulation reshape earnings inequality? Motivated by China's social maintenance fee, we study an overlapping‐generations economy with two skill types, heterogeneous fertility preferences, and a penalty on above‐quota births, coupled with a reduced‐form rule that channels part of the collected revenue to public education. In the public‐education benchmark, households with strong fertility preferences reduce childbearing and work more, so within each skill group, the distribution of earnings‐capacity generalized‐Lorenz dominates its no‐policy counterpart. This ranking is not a utility ranking; mean utility falls in the reported calibration. Between skill groups, revenue recycling can widen inequality, especially when parental ability complements public education in human‐capital production. In an empirically informed illustrative calibration, the policy reduces the within‐group Gini by 45.9%, raises the between‐group Gini by 0.31%, and increases the steady‐state skilled share by 0.32 percentage points. In a full‐equilibrium robustness exercise, allowing households to choose private education amplifies the increase in between‐group inequality in both reported calibrations, although the pooled Gini continues to decline. Redirecting education spending toward disadvantaged children can attenuate the between‐group effect. In the numerical exercise, a planner trading off household utility against within‐group earnings equality chooses a positive penalty only when the weight on equality exceeds a normalization‐dependent threshold.