Association for Public Policy Analysis & Management

In response to a low fertility rate, a number of municipalities in South Korea have been providing family benefits in the form of childbirth grants and child allowance. Using panel data for 230 municipalities that spans the years 2001 through 2014, this paper examines the impact of family benefits on the fertility rate in Korea. I use the fact that different municipalities began providing the family benefits at different times to estimate the impact of family benefits on fertility rates using a difference-in-differences approach. I find a positive effect of family benefits on total fertility rate. Moreover, I find that there is little evidence of an anticipatory response within the municipalities that adopted the policy. Given that a one million Korean won increase in family benefits is associated with 3.5 percent increase in the total fertility rate, an increase in family benefits by about 44 million Korean won would be required to raise the total fertility rate to a safe zone above 1.5 children per woman, where population declines are gradual and easily reversed.