Declining fertility and the rising costs of children and the elderly in East Asia

This paper examines the relationship between the cost of raising children up to self-supporting ages and the number of children parents have, by drawing upon computed results derived from NTA projects in Japan, South Korea, and Taiwan. The paper is unique in that examines the role of the economic support ratio in this relationship.
Our results indicate that the two variables in question have a negative association in the three economies, with the calculated elasticity of −1.01 implying that a decrease in the total fertility rate (TFR) leads essentially to no change in the total cost of childrearing per adult. As regards the per capita child human-capital cost and the TFR, the calculated elasticity amounts to −1.64, suggesting that in these economies the health and education components of per capita child cost are more closely linked to fertility change than other components.
The paper also addresses the question of a trade-off between the relative costs of children and elderly persons from the standpoint of generational equity, as economists often hypothesize that population aging should lead to a decline in the welfare of children relative to the elderly. However, no “crowding out” effect between children and the elderly has been found in the three economies.