Can Education Policy Raise Fertility in Lowest-Low Fertility Countries? A Comparison of East Asia and Southern Europe

Poh Lin Tan, Duke University

In this paper, we identify a cause of low fertility that differs substantially between lowest-low fertility countries in East Asia and Southern Europe. Specifically, we argue that higher returns to university rank in East Asia lead to higher incentives for investing in children’s education. Using data from the 2005-2007 REFLEX country study, we show that the labor market returns to university rank are higher in Japan than in Italy and Spain, and offer some evidence for the causal pathways through which university rank translates to higher earnings. We illustrate the implications for fertility in two distinct ways using a quantity-quality model and a co-production model, and show how higher returns to university rank result in higher child quality and lower child quantity equilibria. Finally, we identify a set of policy solutions consistent with our model and compare their effectiveness to existing policies such as child subsidies.