Essays on the economics of education and fertility

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This thesis studies two topics in the macro-labour literature: investment in human capital and fertility decisions. The thesis comprises of three chapters, the first studying the effects of private tutoring in Korea and its resemblance to a human capital rat race and the second and third investigating the rapid decline in fertility rates experienced in developing countries over the past few decades. With many countries having reached universal primary and secondary education, parental spending on education for supplementary and enrichment purposes has begun to resemble a rat race. In many Asian countries, it is normal for students to receive some or several forms of private tutoring alongside formal schooling. However, unlike the returns to schooling or the effects of school quality on student achievement which have been widely studied, the effects of private tutoring have received limited attention. In the first substantive chapter of this thesis, I exploit exogenous variation in spending on private tutoring caused by the imposition of a curfew on the operating hours of tutoring institutes in Korea, to estimate the impact of spending on tutoring on long-term educational and labour market outcomes. The first stage estimates highlight the severity of the rat race, with curfews imposed as late as 10pm still constraining tutoring expenditure. While I do not find any significant effects of tutoring expenditure on entering college, when I interact tutoring expenditure with parental education, I find a significant, positive effect of tutoring on attending any college for children of less educated parents, while the effect for children of more educated parents is not significantly different from zero. Given that the less educated parents spend much less on tutoring, these results indicate diminishing marginal effects of tutoring, while the lack of an effect in the specification linear in tutoring expenditure points to the average impact (local to those constrained by the curfew) being close to zero. I also find that tutoring expenditure has a positive effect on both completing a four year degree and on being employed. I place these empirical findings within an asymmetric information framework to explain how the use of test scores as a signal for ability leads to inefficiently high investments in tutoring, leading to a rat-race equilibrium. The second paper highlights the trends in fertility rates observed in developing countries, pointing out that cross-country differences in fertility rates have fallen very rapidly over the past four decades, with most countries converging to a rate just above two children per woman. In the second substantive chapter in the thesis, my co-author and I argue that the convergence in fertility rates has taken place despite the limited (or absent) absolute convergence in other economic variables and propose an alternative explanation for the decline in fertility rates: the population-control programmes started in the 1960s which aimed to increase information about and availability of contraceptive methods, and establish a new small-family norm using public campaigns. Using several different measures of family planning programme intensity across countries, we show a strong positive association between programme intensity and subsequent reductions in fertility, after controlling for other potential explanatory variables, such as GDP, schooling, urbanisation, and mortality rates. We conclude that concerted population control policies implemented in developing countries are likely to have played a central role in accelerating the global decline in fertility rates and can explain some patterns of that fertility decline that are not well accounted for by other socioeconomic factors. In the third main chapter of the thesis, we build on the findings presented in the previous chapter by studying a quantitative model of endogenous human capital and fertility choice, augmented to portray a role for social norms over the number of children. The model allows us to gauge the role of human capital accumulation on the decline in fertility and to simulate the implementation of population-control policies aimed at affecting social norms on family size. We also consider extensions of the model in which we allow a role for the decline in infant and child mortality and for improvements in contraceptive technologies (the second main component of the population-control programmes). Using data on several socio-economic variables as well as information on funding for family planning programmes to parametrise the model, we find that, as argued in the previous chapter, policies aimed at altering family-size norms provided a significant impulse to accelerate and strengthen the decline in fertility that would have otherwise gradually taken place as economies move to higher levels of human capital and lower levels of mortality.