Jales study on the fertility effects of Korean baby bonus program published in Jour of Asian Econ

Jun 25, 2021

Childbearing and the Distribution of the Reservation Price of Fertility: The Case of the Korean Baby Bonus Program

Dahae Choo & Hugo Jales

Journal of Asian Economics, June 2021

Hugo Jales

Economics Department

Center for Policy Research

East Asia

Journal of Asian Economics

Hugo Jales

The authors study the fertility effects of a Korean pro-natalist policy. They show that using the same assumptions and the same binary-choice models used in this literature, and they can estimate the entire unconditional distribution of the reservation price of fertility, which is the minimal compensation an agent must receive to induce her to have a (or an additional) child. The authors' estimates show that the program’s benefit level and budget would have to be orders of magnitude (about 15 times) larger for the program to bring South Korea back to desired levels of fertility.

They also found that over 74 percent of the program’s expenditures are associated with infra-marginal births – these are births that would have occurred even in the absence of the financial incentive. The authors show that this is likely not a unique characteristic of the Korean pro-natalist policy but instead a problem of most programs of this nature.