An Analysis of the Causes of Low Fertility Rate in Korea: From the Economic Perspective

While South Korea's total fertility rate has fallen sharply from 4.12 in 1972 to 0.72 in 2023, rapid economic growth and the advancement of women's education have occurred simultaneously. This change led to a significant increase in women's wages, which caused a (+) income effect that increased the demand for children and a (-) substitution effect that reduced the demand. This study used the data of the 4th~25th (2001~2022) of the Korean Labor Panel to estimate the Tobit model and obtained the following results. First, rising household incomes have increased the demand for children. Second, when women's hourly earnings increase, the size of the (-) “substitution effect” is greater than the size of the (+) “income effect”. Third, the substitution effect size was greater with higher educational level. Thus, it can be seen that the rapid rise in women's wages is a major factor in the low birth rate. In order to increase the birth rate in the future, the focus should be on reducing the cost of time for women, rather than simply providing cash support.