Demographic Transition, the Emergence of Childless Families, and Economic Growth in East Asia Francis T. Lui (HKUST) Conference in Honor of Robert Lucas & Nancy Stokey 1

Human Capital and Growth In my neighborhood in Chicago I bring my shirts to a laundry operated by a Korean woman, recently arrived, whose English is barely adequate to enable her to conduct her business…..As I enter, her 3-year-old daughter is seated on the counter, being drilled in arithmetic—which she is very good at and clearly enjoys enormously. Fifteen years from now this girl will be beginning her studies at Chicago or Caltech, alongside the children of professors and Mayflower descendants. (Lucas, Lectures on Economic Growth, p. 17) 2

Demographic Transition (1) 3

Demographic Transition (2) 4

Surprisingly Low Total Fertility Rates in East Asian Economies World2.58Japan1.21 USA2.05South Korea1.21 European Union1.51Taiwan1.21 China (National)1.33Singapore1.14 China (Cities)0.928Hong Kong1.09 China (Beijing City)0.617Macau0.91 China (Rural Areas)

Emergence of Childless Families in Some Economies Hong Kong (2006): 32% of 40-to-44-years old women have no children China (2005): 25.7% of the 50-years-old women have no children Germany: 29% of the women born in 1966 have no children (38.5% among university-educated women) UK: 25% of the women born in 1970 and who have university education will likely remain childless 6

Implications of Childlessness on Growth All the usual implications about aging societies There may be a break-down in the tradeoff between quantity and quality of children (corner solution in quantity) because for a significant proportion of families there are no children to invest in Saving behaviors may change; welfare policies may change; directions of international flows of capital may change 7

Demographic Structures Economy0-14 years old (%)15-64 years old (%)> 64 years old (%) World EU China Japan South Korea Taiwan Hong Kong Singapore

Factors Causing the Emergence of Childless Families Factors pertaining to the Demographic Transition: long life expectancy; rising level of human capital of young adults Other factors such as crowdedness in the cities Cultural differences do not seem to be a good explanation Confucian ethics: The most important virtue of all is filial piety. The greatest disrespect to the ancestors is not having any children 9

East Asian Governments Invest Relatively Little in Education? EconomyRank (out of a sample of 182 economies) Public Expenditure on Education as a share of GDP South Korea854.6 Greece91 (Median)4.4 Hong Kong Japan Singapore China* Macau

Some Conjectures Claim 1: East Asian societies believe in the importance of education Claim 2: Traditional culture in East Asia is conducive to large numbers of children Are these claims contradictory to the points raised in the previous 2 slides? East Asian families invest heavily in the education of their children Despite this, most parents cannot attain their goal of sending their children to top universities. The private marginal cost of having children is very high May need more public expenditures on education, or more leading private universities to appear 11