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The Cost of Low Fertility in Europe

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  • David E. Bloom
  • David Canning
  • Günther Fink
  • Jocelyn E. Finlay

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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14820.

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Date of creation: Mar 2009
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Handle: RePEc:nbr:nberwo:14820

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Citations

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Cited by:
  1. David E. Bloom & David Canning & Günther Fink, 2011. "Implications of Population Aging for Economic Growth," NBER Working Papers 16705, National Bureau of Economic Research, Inc.
  2. Bauernschuster, Stefan & Hener, Timo & Rainer, Helmut, 2013. "Does the Expansion of Public Child Care Increase Birth Rates? Evidence from a Low-Fertility Country," Munich Reprints in Economics 20154, University of Munich, Department of Economics.
  3. David E. Bloom & David Canning & Jocelyn Finlay, 2008. "Population Aging and Economic Growth in Asia," PGDA Working Papers 4008, Program on the Global Demography of Aging.
  4. Bloom, David E. & Sousa-Poza, Alfonso, 2010. "Economic consequences of low fertility in Europe," FZID Discussion Papers 11-2010, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  5. Stefan Bauernschuster & Timo Hener & Helmut Rainer, 2013. "Does Expanding Public Child Care Encourage Fertility? County-Level Evidence from Germany," Ifo Working Paper Series Ifo Working Paper No. 158, Ifo Institute for Economic Research at the University of Munich.
  6. Brainerd, Elizabeth, 2010. "The Demographic Transformation of Post-Socialist Countries," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  7. Vistesen, Claus, 2009. "Ageing and Export Dependency," MPRA Paper 17655, University Library of Munich, Germany.
  8. Erich Striessnig & Wolfgang Lutz, 2013. "Can below-replacement fertility be desirable?," Empirica, Springer, vol. 40(3), pages 409-425, August.

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