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The High Cost of Low Fertility in Europe

  • David E. Bloom

    ()

    (Harvard School of Public Health)

  • David Canning

    ()

    (Harvard School of Public Health)

  • Günther Fink

    ()

    (Harvard School of Public Health)

  • Jocelyn E. Finlay

    ()

    (Harvard School of Public Health)

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 high 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 immigration inflows. To illustrate these effects we construct a population accounting model and simulate steady-state outcomes. Regression analysis indicates the differing marginal effects of long-term fertility change in Europe versus the rest of the world.

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Paper provided by Program on the Global Demography of Aging in its series PGDA Working Papers with number 3208.

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Date of creation: Jun 2008
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Handle: RePEc:gdm:wpaper:3208
Contact details of provider: Web page: http://www.hsph.harvard.edu/pgda

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  19. Jonathan Gruber & David A. Wise, 2002. "Social Security Programs and Retirement Around the World: Micro Estimation," NBER Working Papers 9407, National Bureau of Economic Research, Inc.
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  21. James Feyrer & Bruce Sacerdote & Ariel Dora Stern, 2008. "Will the Stork Return to Europe and Japan? Understanding Fertility within Developed Nations," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 3-22, Summer.
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  24. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
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