Over the last three decades, Southeast Asian countries have experienced substantial fertility declines. This has coincided with a period of rapid economic growth. The question of whether the dramatic declines in Asian fertility levels are the outcome of better economic growth or whether it has resulted from interventionist government policies is an interesting one. While no single causal factor can fully explain the profound fertility decline that has occurred in much of Southeast Asia, this paper explores the hypothesis that economic factors may be important in explaining the fertility transition experienced in this region. We adopt a broad perspective and also include social, institutional, and economic factors. While cultural and social traditions are important, our focus is mainly on their influence on household perception of children through changes in economic factors.
A microeconomic perspective is adopted of which there are two lines of argument: Gary Becker's and Richard Easterlin's. Becker's model provides a systematic theoretical explanation for three commonly observed empirical facts. They include: an inverse association between income and fertility, an inverse relationship between fertility and female education and labour force participation, and finally a negative relationship between children's schooling levels and fertility (Becker 1960; Becker and Barro 1988).
Easterlin (see Easterlin 1978; Easterlin, Pollack, and Wachter 1980) argues that Becker's view of fertility choice is incomplete, since important supply-side variables are treated as exogenous. Although similar to Becker's model in several respects, Easterlin's analysis also includes theoretical and empirical considerations that feature in the demographic and sociological literature on population. (1)
However, in analysing fertility behaviour, the existing theoretical literature has focused on the opportunity cost of parental time, and on factors that affect child costs. Another important factor that is well documented in the demography and sociology literature is the possibility that children are considered as economic assets by poor households in rural areas (see Caldwell 1976, 1982). The Becker model, for example, does not take into account the social and institutional context in which fertility decisions are being made. For example, during the early stages of development children contribute economically: through child labour when they are young, and by being informal sources of old-age security as adults. Under such circumstances, a pre-condition for fertility decline is that children change from being economic assets to liabilities.
In this paper, we argue that, in order to be more consistent, economic explanations of fertility behaviour must also consider the effect of changes in child benefits. There are several factors that bring about changes in fertility behaviour, such as higher female education and labour force participation levels, fall in infant mortality, higher levels of urbanization, role of family planning programmes, and so on. While these are by no means the only factors affecting fertility behaviour, it is possible to reconcile established economic explanations of fertility decline (such as Becker's and Easterlin's models) to demographic and sociological factors (such as Caldwell's wealth flow theory).
The data used here do not permit a comprehensive analysis of all factors and all the countries in the region. Nevertheless, there is consistent empirical support for the role of economic factors in influencing fertility decisions. Hence, the sample is restricted to those developing countries that have a GNP per capita of less than US$10,000 and have continuous data going back to the 1930s. (2) The countries included in the analysis are China, Thailand, the Philippines, Malaysia, and Indonesia from the Southeast Asian region and India and Sri Lanka from the South Asian region. …