Fertility Falls Everywhere But Will Growth Suffer?

The global fertility decline

Jesús Fernández-Villaverde and Patrick Norrick analyze total fertility rates in 236 countries and territories from 1950 to 2023, using mainly the United Nations World Population Prospects 2024 database. The authors estimate a single-factor model that separates global fertility movements from country-specific levels, trends, and temporary shocks.

Findings

• The authors argue that global fertility is likely to have fallen below replacement level by 2026. They emphasize that this does not mean the world population immediately declines: population momentum means that large existing cohorts will continue to produce births, while mortality among older generations remains comparatively low.
• Fertility is no longer falling only in wealthy economies as several middle-income countries, such as Mexico, Tunisia, Thailand, Colombia, Iran, and Brazil, have reached very low fertility levels despite having substantially lower incomes than the United States.
• The most important empirical result is that the recent global decline is driven less by a single common worldwide factor than by persistent country-specific trends.
• The authors do not reject the quality–quantity trade-off, housing costs, childcare constraints, or labour-market conditions. They argue, however, that these mechanisms cannot individually explain the speed, breadth, and geographical distribution of the recent decline.
• Government policy is likewise judged to have limited power. The paper reviews evidence showing that pronatalist transfers, parental leave, childcare support, and housing interventions can raise fertility, but generally by modest amounts.
• After assessing the alternative mechanisms, the authors place greatest weight on changing preferences and social norms, although they present this as a conjecture rather than a demonstrated causal result.
• The paper also acknowledges possible benefits from lower fertility and slower population growth, including less pressure on infrastructure, housing, and emissions, as well as the possibility that smaller cohorts could receive more educational resources. However, it stresses that these benefits do not eliminate the political and fiscal challenge of redistributing income from a smaller working population to a larger retired population.

Terra Incognita: The Economics of a Shrinking World
Authors: Jesús Fernández-Villaverde, Patrick Norrick
From: University of Pennsylvania, Northwestern University

Demographic decline, automation, and economic growth

Daron Acemoglu, David Autor, Keelan Beirne, and Andrew Scott examine how falling birth rates affect economic performance. They use cross-country data from 1950–2020 as well as UN demographic data, Penn World Tables, U.S. Census and American Community Survey data, and patent and industry data, measures of GDP per working-age adult, wages, employment, capital, productivity, and high-tech activity.

The authors estimate regressions linking past birth rates to subsequent economic growth, while controlling for initial income, population size, age structure, education, urbanisation, and sectoral composition. They also use historical variation in civilian and military deaths during the Second World War to distinguish the effects of population decline from population ageing.

A theoretical model explains how labour scarcity may encourage firms to adopt labour-saving technologies and increase investment in capital.

Findings

The paper challenges the conventional view that declining fertility necessarily harms economic growth.

• Lower birth rates are associated with faster growth in GDP per working-age adult and higher wage growth.
• Aggregate GDP and total earnings do not appear to decline significantly despite slower population growth.
• Countries and U.S. regions with lower birth rates show more labour-saving patents, greater high-tech activity, higher capital investment, and stronger productivity growth.
• The authors find little evidence that the results are mainly explained by greater female labour-force participation, higher education, reduced agricultural employment, or standard Solow-model effects.
• Evidence from Second World War deaths suggests that the scarcity of younger workers, not population decline alone, drives the positive productivity response.
• The proposed explanation is that demographic ageing creates labor shortages, encouraging firms to automate and adopt technologies that raise productivity. The authors stress, much like Jesús Fernández-Villaverde and Patrick Norrick above, that these findings do not eliminate the fiscal pressures associated with ageing populations, such as rising pension and healthcare costs.

Baby Busts and Growth Booms: Demographic Change and the Macroeconomy
Authors: Daron Acemoglu, David Autor, Keelan Beirne, Andrew Scott
From: MIT, London Business School