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Status Externalities in Education and Low Birth Rates in Korea

Author

Listed:
  • Seongeun Kim
  • Michèle Tertilt
  • Minchul Yum

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.

Suggested Citation

  • Seongeun Kim & Michèle Tertilt & Minchul Yum, 2024. "Status Externalities in Education and Low Birth Rates in Korea," American Economic Review, American Economic Association, vol. 114(6), pages 1576-1611, June.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:6:p:1576-1611
    DOI: 10.1257/aer.20220583
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    References listed on IDEAS

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    1. Guo, Juncong & Qu, Xi, 2022. "Competition in household human capital investments: Strength, motivations and consequences," Journal of Development Economics, Elsevier, vol. 158(C).
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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