The Cost of Low Fertility in Europe
We analyze the effect of fertility on income per capita with a particular focus on the experience of Europe. For European countries with below-replacement fertility, the cost of continued low fertility will only be observed in the long run. We show that in the short run, a fall in the fertility rate will lower the youth dependency ratio and increase the working-age share, thus raising income per capita. In the long run, however, the burden of old-age dependency dominates the youth dependency decline, and continued low fertility will lead to small working-age shares in the absence of large migration inflows. We show that the currently very high working-age shares generated by the recent declines in fertility and migration inflows are not sustainable, and that significant drops in the relative size of the working-age population should be expected. Without substantial adjustments in labor force participation or migration policies, the potential negative repercussions on the European economy are large.
This paper was prepared for the International Conference on the Economic Consequences of Low Fertility, April 11 - 12 2008 at the University of St. Gallen Switzerland. We are grateful to three anonymous referees, and to Rainer Münz, and other participants in the Conference for their helpful comments. Support for this research was provided by grant number 5 P30 AG024409 from the National Institute on Aging, National Institutes of Health, and by a grant from the William and Flora Hewlett Foundation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
- In the long run, low rates of fertility are associated with diminished economic growth. As in many parts of the world, Europe has...
European Journal of Population / Revue européenne de Démographie May 2010, Volume 26, Issue 2, pp 141-158 The Cost of Low Fertility in Europe David E. Bloom, David Canning, Günther Fink, Jocelyn E. Finlay