This study examines the effect of Korean government programs on total fertility rate (TFR) in Korea. There are several innovations in this paper, such as decomposition of fertility, panel fixedeffects model, and simultaneous consideration of child institutionalcare subsidy program and child home-care allowance program, which have little been addressed in the previous literature.
The results suggest that TFR over the last decade has stagnated due to rapid decline in the nuptiality rate although the marital fertility has been increased. The results of panel fixed-effects model also imply that marriage decisions of single persons and fertility decisions of married couples are determined by different factors. Contrary to previous studies, the results also show a positive effect of child institutional-care subsidy on TFR. The results are robust even when we consider potential substitution effects. However, the results also suggest that the efficiency of the subsidy program has been decreased.
Based on all these results, we conclude that it is premature to conclude that the government’s efforts to promote fertility was a total failure, as widely believed.