An Economic Approach to Fertility Behavior of Korea

Korea's economic growth is the most significant event in the history of economic development in the twentieth century. The total fertility rate of Korea sharply declined during the same period, from 6.0 in 1960 to 1.2 in 2010. This low fertility rate poses concerns for Korea which experiences fastest growing aging population in OECD. The objective of this study is to examine the determinants of the fertility rate in Korea based on the household production function approach. It is postulated that as income increases, there is a greater demand for children. At the same time, since child rearing uses mother's time intensively, the relative cost of having children rises, and the utility maximizing couple shifts away from the relatively more costly to less costly sources of utility and demand for children decreases. This study suggests the negative substitution effect has outweighed the positive income effect on fertility rate in Korea. We employ a multiple regression model to determine the explanatory variables on total fertility rate. Cross-section and time series data are used to conduct a panel data analysis. The implication of this framework is that the economic approach illuminates the opposite effects of Korea's economic progress on the fertility behavior.