A research study has found that the so-called positional competition surrounding children's education drives up private education spending and suppresses childbirth.

The analysis particularly showed that if private education spending decreases among top-income brackets, the educational expense burden on lower-income brackets also drops.

Professor Kim Sung-eun of Sejong University's Department of Economics and other researchers presented a paper containing these findings at a joint conference hosted by the Bank of Korea (BOK), the Centre for Economic Policy Research (CEPR), and the Organisation for Economic Co-operation and Development (OECD) today (Sept. 2).

The research team defined this phenomenon—where parents compare their children's educational achievements with those of others and competitively increase educational investment—as positional competition, analyzing how this competition affects private education spending and fertility.

First, in cross-country comparisons, countries with greater concerns over educational competition tended to have lower fertility rates and faster decline rates.

South Korea, Singapore, and Chile were cited as representative examples.

In South Korea specifically, low-income households were found to spend a relatively higher proportion of their income on private education.

The proportion of private education spending relative to income for the bottom 20% income bracket (first decile) reached 8.4%, higher than the 5.1% for the top 20% income bracket (fifth decile).

The spillover effect of private education spending from top-income households to other classes was also confirmed.

The research team indicated that if private education expenses for the top 15% of households decreased by 10%, the proportion of private education spending by the bottom 50% of households would also drop by an average of 0.4 to 0.9 percentage points from 6%.

Positional competition surrounding private education was analyzed to have a substantial impact on childbirth as well.

The research team estimated that had there been no such positional competition effect, women born between 1970 and 1975 would have had an average of 2.45 children, which is 28% higher than the actual 1.92 children.

The research team derived educational investment per child and fertility rates at equilibrium through a model reflecting the intensity of comparison motives, and empirically verified this by utilizing regional and temporal variations in South Korea's late-night cram school (hagwon) tutoring hour regulations.

The researchers emphasized that because positional competition causes socially excessive educational investment and low fertility, policies to alleviate this competition can improve both the fertility rate and welfare without imposing fiscal burdens.

In particular, they suggested that an effective approach could be securing financial resources by taxing the private education spending of high-income groups—who serve as the benchmark for comparison—and distributing those funds as childbirth subsidies.

Starting today, the BOK is holding a two-day joint conference with the CEPR and the OECD under the theme "The Economics of Aging and Longevity: From Challenges to Opportunities."

During the event, Fumio Hayashi, professor emeritus at the National Graduate Institute for Policy Studies (GRIPS) in Japan, will deliver a keynote speech on the theme "Fundamental Causes of Japan's 30-Year Stagnation."

The speech suggests that population aging has led to stagnation, and that similar growth slowdowns are likely to appear in South Korea, China, and Taiwan.

Research will also be introduced showing that over the past 70 years, countries with lower fertility rates actually experienced higher per-capita growth rates of the working-age population.

In opening remarks released via video while on an overseas business trip, BOK Governor Rhee Chang-yong stated, "Demographic shifts are a formidable challenge, but they can be foreseen in advance and prepared for in a timely manner."

He added, "Today, South Korea stands at the center of the artificial intelligence (AI) ecosystem, enjoying unprecedented semiconductor production and the investment benefits driven by AI," and emphasized, "Now is the time to prepare, not to procrastinate."

(Photo: Yonhap News)