J Popul Econ (1999) 12: 463±487 999 999 Is a signi®cant socio-economic structural change a pre-requisite for `initial' fertility decline in the LDCs? Evidence from Thailand based on a multivariate cointegration/vector error correction modelling approach Abul M.M. Masih1, Rumi Masih2,3 1 School of Finance and Business Economics, Faculty of Business, Edith Cowan University, Joondalup Campus, Perth WA 6027, Australia (e-mail: a.masih@cowan.edu.au; Fax: (618) 9400 5271) 2 Faculty of Economics and Politics, University of Cambridge, Cambridge CB3 9DD, England 3 Emerging Markets Economic Research, Goldman, Sachs and Co., New York, NY 10004, USA Received: 7 April 1995/Accepted: 15 May 1998 Abstract. This study is the ®rst attempt at placing the analysis of fertility in a temporal dynamic framework in the case of a developing Asian economy such as Thailand by binding the relationship between fertility and its determinants within a cointegrated system. The analysis is based on the application of the following recently developed dynamic time series techniques: cointegration, vector error-correction modelling, variance decompositions and the impulse response functions. The results tend to indicate that in the complex dynamic interactions, the importance of the conventional `structural' hypothesis as a signi®cant factor in bringing fertility down in the longer term cannot be de- nied. However, in the short to longer term, our ®ndings, although not fully supportive of any particular hypothesis, appear to be broadly consistent more with the hypothesis emphasising the critical role played by the `ideational' or di¨usion forces along with the demographic variables in ensuring `initial' fer- tility decline than with the conventional `structural' hypothesis emphasising a signi®cant socio-economic structural change as a pre-condition for `initial' fertility decline. JEL classi®cation: J13, O15, C52 Key words: Fertility, vector error-correction model, variance decomposition At the risk of being invidious and without implicating any, we would like to especially thank: John Caldwell and Pat Caldwell for encouragement in motivating us to undertake such an analysis and for their insightful comments and discussions; as well as Soren Johansen, Katerina Juselius, Deane Terrell, Adrian Pagan, seminar participants at United Nations (ESCAP), Bangkok. An earlier version of this paper was also presented at an International Conference on Development Projects: Issues for the 1990s, Bradford, U.K. The comments of anonymous referees are greatly appre- ciated. Research assistance from Sam Jegatheswaran is gratefully acknowledged. The views ex- pressed in this paper are not necessarily shared by Goldman, Sachs and Co. or any of its related o½ces. Responsible editor: Bernard M.S. Van Praag