From the 1994 book Ship of Dreams page 27.

The Sandman collects the falling stars and grinds them into sand. Some of it is used as sleeping sand; the rest is used to make the new stars. To make new stars, the Sandman melts the sand in his furnace and pours it into a mold. When it cools, a new star is born! The star is then engraved with the name of the world's newest child - and the star is placed in the sky above the newborn's home town, where it will hang forever. - Dean Morrissey