The Cost of Low Fertility in Europe

26 Pages Posted: 29 Mar 2009 Last revised: 1 Jul 2010

See all articles by David E. Bloom

David E. Bloom

Harvard University - T.H. Chan School of Public Health; National Bureau of Economic Research (NBER)

David Canning

Harvard University - T.H. Chan School of Public Health

Günther Fink

Harvard University - Department of Population and International Health

Jocelyn Finlay

Harvard University - Harvard School of Public Health

Date Written: March 2009

Abstract

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.

Suggested Citation

Bloom, David E. and Canning, David and Fink, Günther and Finlay, Jocelyn, The Cost of Low Fertility in Europe (March 2009). NBER Working Paper No. w14820, Available at SSRN: https://ssrn.com/abstract=1369056

David E. Bloom (Contact Author)

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
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617-432-0654 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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David Canning

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
United States

Günther Fink

Harvard University - Department of Population and International Health ( email )

665 Huntington Avenue
Boston, MA 02115
United States

Jocelyn Finlay

Harvard University - Harvard School of Public Health ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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