Abstract
This chapter examines the relationship between the cost of raising children up to self-supporting ages and the number of children parents have, by drawing heavily upon computed results for Japan, South Korea, and Taiwan. The results suggest that the two variables in question have a negative association in these economies, and that the calculated elasticity is −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. More importantly, as regards the per capita child human-capital cost and the TFR, the calculated elasticity amounts to −1.64, suggesting that in the three economies the health and education components of per capita child cost are more closely linked to fertility change than other components. Unlike previous studies, this one examines the role of the economic support ratio in its analysis of the cost of raising children and the number of children parents have. It also addresses the trade-off between the relative costs of children and elderly persons from the standpoint of generational equity. Economists often hypothesize that population aging induced by reduced fertility and extended longevity should lead to a decline in the welfare of children relative to the elderly. This study, however, does not find such a “crowding out” effect between children and the elderly in the three East Asian economies.
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Notes
- 1.
It should be noted, however, that the NTA do not include voluntary care work and other services produced inside the household.
- 2.
For example, the Chinese government is already concerned about the adverse effects of the cessation of the first demographic dividend in that country, which is projected to end in 2014, and the possibility that China will be facing the “aging before affluence” situation in the 2010s (See Ogawa and Chen 2013).
- 3.
Most of the government policies measures in Japan mainly focus on women, but some efforts have been directed at men, too. For example, in recent years the government has been encouraging married men to utilize childcare leave. However, the impact has been virtually nonexistent, since the proportion of men taking advantage of the scheme has been around 1 %.
- 4.
Although foregone income is an important part of costs to be incurred in raising children and taking care of elderly persons, it falls outside the scope of this chapter.
- 5.
- 6.
As a result of recent legislation, however, from 2006 the age of retirement was gradually raised from 60 years and became 65 years in 2013.
- 7.
By applying the same computational procedure to each economy’s data, we have computed the timing and duration of the first demographic dividend for Taiwan and South Korea. As shown in Appendix Fig. 3.12, in the case of South Korea, the first demographic dividend phase ended in 2007, whereas Taiwan reached the end of its first dividend stage in 2013.
- 8.
Two points should be noted. First, the terms “familial transfers” and “private transfers” are used interchangeably in this chapter; both of them refer to private transfers received by households from any source, of which the predominant share is surely familial transfers. Second, although net private transfers consist of bequests and inter vivo transfers, the computation of the bequest component has not been completed at the time of our writing this chapter. For this reason, bequests are excluded from the computational results reported here.
- 9.
In the quantitative exercise that follows, each of the three economies (Japan, Taiwan, and South Korea) experiences during the period under review a rising trend in the direct cost of raising children up to their self-sufficient ages. In Japan the age increases from 23 years in 1984 to 26 years in 2004 and Taiwan records a comparable rise from 1981 to 2005, whereas South Korea experiences the same shift more swiftly from 1996 to 2005. In contrast, each of the three economies shows a different pattern of change over time as regards the age at which the elderly cease to be self-sufficient. In both Japan and South Korea, this age remains stable: around 58–59 years for Japan and 55 years for South Korea. In Taiwan, however, the age at which the LCD shifts from negative to positive gradually declines from 63 years in 1981 to 53 years in 2005.
- 10.
We have also run the same regressions by adding the 2002 data for China, but the results are basically the same as those for the other three East Asian economies alone. The validity of this observation, however, needs to be carefully assessed as China’s time-series data become available.
- 11.
Aside from these two regressions for the three East Asian economies, we have also run additional regressions by employing data from other countries that were available on the NTA website at the time of writing this chapter. The following eight economies have been incorporated into the additional regressions: Chile (1997), Costa Rica (2004), France (2001), Hungary (2005), the Philippines (1999), Slovenia (2004), the US (2003), and Uruguay (2004). The computed values of elasticity for this expanded data set are −0.77 for per capita child LCD and −1.56 for the human capital component of per capita child LCD. These additional results show that the computed elasticity values are smaller when all the economies are combined than when the three selected East Asian economies are examined separately from the others.
- 12.
The simple correlation coefficient between the two variables shown in Fig. 3.11 amounts to 0.96.
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Acknowledgments
Research for this study was partially funded by two grants from Nihon University: the Nihon University Multidisciplinary Research Grant 2011 and the Collaborative Research Grant of the Research Institute of Economic Science, the College of Economics.
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Appendix
Appendix
First demographic dividend: South Korea and Taiwan, 1975–2025
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Ogawa, N., Mason, A., Lee, SH., Tung, AC., Matsukura, R. (2015). Very Low Fertility and the High Costs of Children and the Elderly in East Asia. In: Ogawa, N., Shah, I. (eds) Low Fertility and Reproductive Health in East Asia. International Studies in Population, vol 11. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9226-4_3
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