I have on-gain/off-again Twitter wars with the opinionated Professor Noah Smith of Stony Brook University on subjects Japanese. In a recent exchange I lost patience with the good doctor, for which I am only slightly sorry.
Dr. Smith asked a simple question: why did Japanese women's fertility (number of births per woman) fall when the level of participation of Japanese women in the workforce was still low? To which I offered a simple answer: because age of first marriage rose. (Link)
In the economics explanation women have fewer children based upon calculations marginal utility and opportunity cost. While in agricultural societies children represent potential increases in labor force and output, in industrial and post-industrial societies children represent zero increase in output. Furthermore, for the woman in developed societies the birth of each child represents an economic subtraction, time and energy that could have been spent furthering their careers or increasing their take-home pay.
In Japan's case, however, declines in fertility preceded and exceeded possibilities of tradeoff between work and childbirth.
Hence my answer -- that in East Asia behavioral effects of calculations of marginal utility and opportunity cost are small compared to the effects on fertility of later marriage and the social stigma/economic catastrophe of out-of-wedlock birth. In contradistinction to the economic explanation, married women in Japan are having children at the same rate they always have -- lost economic opportunity turns out to be a feeble predictor of Japanese fertility.
The policy implications of this for the second of the Abe Administration's New Three Arrows -- raising the number of births from 1.4 per woman to 1.8 -- are clear. More day care, including day care centers inside corporate buildings (Link- J)? Largely irrelevant for fertility. Relevant for the workforce participation rate? Sure, flattening the infamous "M Curve" (Link). But largely irrelevant for fertility.
To raise fertility, the government can:
1) Convince Japanese to marry in their early twenties like they did in the 1970s.
2) Eliminate the social stigma and economic consequences of out-of-wedlock birth.
3) Increase the rate at which women above 35 years of age have children or extend the window of fertility by a delay in the onset of menopause, or
4) A combination of all three.
Good luck with the above.
But don't take my word for it. Check out the amazing slide presentation of Saito Jun of the Japan Center for Economic Research on Japan's capacity to overcome its lower fertility and shrinking population (Link). The whole (expletive deleted) argument over Japan's demographic limits to growth is laid out in detail.
Those with a little more time can check out the Tokyo on Fire videos for discussions of these matters. Like this one perhaps.
Later - There are many, many debates where I am rooting for Dr. Smith, such as the one he is currently having with John Cochrane on inter-generational fairness. (Link)
An econ theory, falsified
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