South Korea: Baby Bonus & Birth Rates

Study: Baby Bonus, Fertility, and Missing Women by Wookun Kim

South Korea’s plummeting fertility rates have sounded alarms, prompting the government to implement cash transfer policies aimed at boosting birth rates. This analysis delves into the causal impacts of these pro-natalist incentives on fertility, examining changes in birth rates, the sex ratio at birth, and infant health.

Key Findings

• Impact on Birth Rates: Cash transfers have led to a notable increase in birth rates across all orders of birth. The total fertility rate would have been 4.7% lower in the absence of these transfers, equating to approximately 562,439 fewer births.
• Effect on Sex Ratio at Birth: The baby bonus reduced the probability of a third child being a boy, suggesting a shift toward the natural sex ratio and indicating a potential moderation of son preference.
• Consequences for Infant Health: Despite positive intentions, cash transfers resulted in a slight decrease in birth weight and gestational age, particularly for third-order births. However, early-life mortality rates remained unaffected.

Mechanisms Explored

The analysis explores several mechanisms behind these outcomes:

• Spatial Redistribution: There’s little evidence suggesting significant migration in response to cash incentives.
• Temporal Adjustment of Fertility: Increases in birth rates are attributed to a rise in completed fertility rather than changes in the timing of childbirth.
• Selection into Childbearing: The incentives have attracted families likely to be negatively selected in terms of unobservable characteristics that affect infant health.
• Son Preference: The cash transfers have interacted with son preference, contributing to a more balanced sex ratio at birth.

Policy Implications

While the cash transfers have successfully increased birth rates, they alone may not be sufficient to elevate fertility rates to the desired 2.1 replacement level. Moreover, unintended consequences such as shifts in the sex ratio at birth and slight declines in infant health metrics necessitate a nuanced approach to pro-natalist policies.

Future research should investigate the long-term implications of these incentives, particularly regarding the affected children’s outcomes. Understanding the interplay between policy measures, including cash transfers and parental leave, is crucial for crafting comprehensive strategies to address low fertility rates.

Conclusion

South Korea’s experience with cash transfer policies offers valuable insights into the complexities of pro-natalist interventions. While effective in boosting fertility rates, these policies also bring about unintended demographic and health outcomes, underscoring the need for careful policy design and continuous evaluation.