Analyzing the Relation between Multi-child Family and Housing Consumption Using an Instrument Variables Approach

Total fertility rate was reduced from 4.53 in 1970 to 1.59 in 1990 in Korea. Total fertility rate continued to decrease and in 2005, recorded 1.08, the lowest among OECD countries. The Korean government concerned that it will cause a negative effect on potential economic growth in Korea. The Korean government is implementing various policies to raise fertility rate. In the housing sector, the government is supplying housing especially to multi-child families who have 3 or more children for encouragement of childbirth. The theme of this study is the relation between children and housing consumption. This study empirically analyzes the effects of the number of children on the housing demand. The summary of the findings and the implications of the study is as follows. First, the first and the second child genders are an effective instrument variable for the multi-child family. Although there are different aspects in analytical results using instrumental variables by housing occupancy type, usefulness of instrumental variables was identified in housing consumption analysis. Second, as shown in analytical results, multi-child families are shown to reduce housing consumption. This means that housing consumption of main policy target of special housing supply program being implemented by the government is in unfavorable condition