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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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    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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    Cited by:

    1. Gradstein, Mark, 2025. "Education fever: Inequality, fertility and growth," BOFIT Discussion Papers 12/2025, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Yang Gao & Hongling Xie & Qiannan Wang & Chen Chen, 2024. "How educational inequality affects family multichild behavior—evidence from super high schools," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    3. Kim, Hyeongsuk & Lee, Chulhee & Eggleston, Karen, 2025. "The evolution of age-friendly jobs in a rapidly ageing economy," The Journal of the Economics of Ageing, Elsevier, vol. 31(C).
    4. Zhao, Da & Zhang, Jun & Tang, Jue, 2024. "Job insecurity and fertility: Evidence from massive lay-offs in urban China," Journal of Asian Economics, Elsevier, vol. 94(C).
    5. Jungho Lee & Sunha Myong, 2026. "Workplace Norms and Fertility," Working papers 2026rwp-277, Yonsei University, Yonsei Economics Research Institute.
    6. Kim, Hyejin & Lee, Jongkwan & Peri, Giovanni, 2025. "The effect of low-skilled immigration on local productivity and amenities: Learning from the South Korean experience," Journal of Urban Economics, Elsevier, vol. 146(C).
    7. Olympia Bover & Nezih Guner & Yuliya Kulikova & Alessandro Ruggieri & Carlos Sanz, 2025. "Family-Friendly Policies and Fertility: What Firms Have to Do With It?," Working Papers wp2025_2517, CEMFI.
    8. Shenglong Liu & Yuanyuan Wan & Shengxiang Xie & Xiaoming Zhang, 2025. "More Access, More Competition: Unintended Consequences of Public Education Expansion in China," Working Papers tecipa-812, University of Toronto, Department of Economics.
    9. Paula E. Gobbi & Anne Hannusch & Pauline Rossi, 2026. "Family Institutions and the Global Fertility Transition," Journal of Economic Perspectives, American Economic Association, vol. 40(1), pages 47-70, Winter.
    10. Cho, Yunho & Kim, Jiseob & Kim, Julie, 2025. "Why old-age poverty matters: Evidence from consumption responses to income shocks," Journal of Macroeconomics, Elsevier, vol. 86(C).
    11. Kaivan Munshi & Swapnil Singh, 2024. "Social Status, Economic Development and Female Labor Force (Non) Participation," Cowles Foundation Discussion Papers 2417, Cowles Foundation for Research in Economics, Yale University.
    12. Sagiri Kitao & Kanato Nakakuni, 2023. "On the Trends of Technology, Family Formation, and Women's Time Allocation," CAMA Working Papers 2023-54, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Gao, Han & Lu, Bei, 2025. "Reforming China’s public pension system: Fiscal sustainability and the challenge of formality-based inequality," Economic Modelling, Elsevier, vol. 153(C).
    14. Cevat Giray Aksoy & Jose Maria Barrero & Nicholas Bloom & Katelyn Cranney & Steven J. Davis & Mathias Dolls & Pablo Zarate, 2026. "Work from Home and Fertility," ADB Economics Working Paper Series 839, Asian Development Bank.
    15. Hu, Peinan & Gao, Xuwen & Huangfu, Bingyu, 2025. "Fertility restriction, human capital investment and gender equality: Evidence from the one-child policy in China," Journal of Economic Behavior & Organization, Elsevier, vol. 240(C).
    16. Mark Gradstein, 2026. "Education fever: inequality, fertility, and growth, with application to China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 39(1), pages 1-21, March.
    17. Reona Hagiwara, 2025. "Macroeconomic and welfare effects of family policy: cash transfers vs in-kind benefits," The Japanese Economic Review, Springer, vol. 76(2), pages 375-427, April.
    18. Jong-Wha Lee & Eunbi Song, 2025. "Women's Education, Employment, and Cost of Family Formation: A Structural Analysis of Fertility Decline in Korea," CAMA Working Papers 2025-51, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    19. Toama Boke Aime ARNAULD & Junichi FUJIMOTO & Minchung HSU, 2026. "Marriage, Fertility, and Female Labor Force Participation in an Aging Economy," Discussion papers 26014, Research Institute of Economy, Trade and Industry (RIETI).
    20. Dai, Chaonuo & Zhou, Yuzhi, 2025. "Rank, peer achievement, and shadow education: Evidence from secondary school students in China," Economics of Education Review, Elsevier, vol. 108(C).
    21. Chihiro Inoue & Yusuke Ishihata & Suguru Otani, 2026. "Marital Sorting on Pre-Marital Preferences for Household Behavior," Papers 2603.25372, arXiv.org.
    22. Taehoon Kim, 2026. "The impact of shadow education expenditures on fertility rates in South Korea," Journal of Population Economics, Springer;European Society for Population Economics, vol. 39(1), pages 1-36, March.
    23. Bernardus van Doornik & Dimas Fazio & Tarun Ramadorai & Janis Skrastins, 2024. "Housing and Fertility," Working Papers Series 612, Central Bank of Brazil, Research Department.
    24. Lukas Mahler & Michéle Tertilt & Minchul Yum, 2025. "Policy Concerns in an Era of Low Fertility: The Role of Social Comparisons and Intensive Parenting," CRC TR 224 Discussion Paper Series crctr224_2025_705, University of Bonn and University of Mannheim, Germany.

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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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