Status Externalities in Education and Low Birth Rates in Korea

Seongeun Kim, Michèle Tertilt and Minchul Yum

American Economic Review, 2024, vol. 114, issue 6, 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.

JEL-codes: D31 D62 E24 I21 I28 J13 O40 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (5)

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DOI: 10.1257/aer.20220583

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