Status Externalities in Education and Low Birth Rates in Korea
Seongeun Kim, Michèle Tertilt, Minchul Yum
American Economic Review · 2024 · Volume 114 · Issue 6
Abstract
South Koreans appear to be preoccupied with their offspring's education and also have the lowest total fertility rate in the world. We propose a novel theory with status externalities and endogenous fertility connecting these facts, motivated by novel empirical evidence on private education spillovers. Using a quantitative model calibrated to Korea, we find that fertility would be 28 percent higher without the externality. We explore the effects of government policy: a pro-natal transfer or an education tax can increase fertility and reduce education spending. An education tax of 22 percent together with moderate pro-natal transfers maximizes the current generation's welfare.
Keywords
Personal Income, Wealth, and Their Distributions, Externalities, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Analysis of Education, Education: Government Policy, Fertility, Family Planning, Child Care, Children, Youth, Economic Growth and Aggregate Productivity: General
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