The Effect of the Cost of Children on Recent Fertility Decline in Japan

In this paper, the effect of the cost of children on fertility rate is estimated in order to verify the hypothesis that the recent fertility decline in Japan was caused by the rise of the cost of children. As cost of children, two types of measures were used. One is the cost from the Rothbarth model of equivalence scale, and the other is the monthly expenditure for children (per child). Since the cost of children itself is an endogenous variable, instrument variable estimation was made. In the estimation where the number of children is used as the dependent variable, the cost of children showed statistically significant negative effects on fertility. Thus, as a policy implication, decreasing the cost of children is likely to affect the fertility rate positively. The examples for these policies are extension of the subsidies for education or for young children.