American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Status Externalities in Education and Low Birth Rates in Korea
American Economic Review
vol. 114,
no. 6, June 2024
(pp. 1576–1611)
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.Citation
Kim, Seongeun, Michèle Tertilt, and Minchul Yum. 2024. "Status Externalities in Education and Low Birth Rates in Korea." American Economic Review, 114 (6): 1576–1611. DOI: 10.1257/aer.20220583Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- D62 Externalities
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- I21 Analysis of Education
- I28 Education: Government Policy
- J13 Fertility; Family Planning; Child Care; Children; Youth
- O40 Economic Growth and Aggregate Productivity: General