The lowest fertility rates in the world now occurring in East Asia, where fertility-enhancing policies like cash-support programs have proven to be ineffective in raising fertility. Prior studies have indicated that the substantial costs associated with childcare and education in East Asia play a significant role in perpetuating the region’s consistently low fertility rates. This paper develops a model of parental fertility decisions and educational investments within a large contest and seeks to answer two primary questions: firstly, how a competitive environment in education contributes to a low fertility equilibrium; and secondly, what factors give rise to such intense competition in education. The analysis demonstrates that as the disparity in utility to parents between children’s success and failure worsens, the equilibrium fertility rate declines through education competition. And the reliance on private investment in education for college entrance examinations has made the competition more intense. In such a competitive environment, fertility-enhancing policies such as cash-support programs would not increase fertility but increase the investment in children’s education at equilibrium. Emphasizing non-private investment factors in education, such as intellectual aptitude and public investment, has the potential to mitigate the highly competitive environment and increase the fertility rate with relatively lower institutional costs.

Ji Li is currently a PhD candidate at the Research School of Economics. His research delves into crucial aspects of China’s developmental trajectory, examining the intricate interplay of policy, societal norms, and individual choices within the realms of family planning, education, and fertility behavior. Through his work, he seeks to unravel the complexities of these interactions and their far-reaching implications, both within China and in a broader global context.