Does Pro-Natalist Cash Transfer Work? Evidence from Local Programs in South Korea
The economics literature has focused more on family planning policies in the context of developing countries to reduce the birth rate. However, much less attention has been given to pro-natalist policies that increase number of births, unjust to the fact that many countries now experience fertility rates below the 2.1-replacement level of fertility. Since 1983, the total fertility rate of South Korea has stayed below the replacement level, reaching the lowest in the world in 2005. This paper exploits a unique setting in South Korea to identify the effects of local pro-natalist cash-transfer policies on fertility and finds positive causal effects of cash-transfer policies on fertility. In particular, a cash transfer of 1,000 USD increased the total fertility rate by 0.022 children per woman or 1.8 percent. Next, decomposing total fertility rates by birth parity and age of mothers reveals that the pro-natalist cash transfers had parity-specific effects and did not have effects on fertility rates of adolescents. Lastly, I find no evidence of changes in quality at birth and exacerbation of son preference due to the cash transfer.