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.
Nous analysons l’effet de la fécondité sur le revenu par habitant, avec un intérêt particulier pour le contexte européen. Pour les pays européens avec une fécondité inférieure au seuil de remplacement, le coût de la baisse continue de la fécondité ne pourra être apprécié que sur le long terme. A court terme, nous démontrons que la baisse de la fécondité réduira le rapport de dépendance des jeunes et élèvera la part de la population d’âge actif, ce qui entraînera une hausse du revenu par habitant. A long terme, le fardeau de la dépendance des personnes âgées pèsera toutefois plus que la baisse de la dépendance des jeunes, et la poursuite de la chute de la fécondité conduira à un abaissement de la part de la population d’âge actif, en l’absence de mouvements migratoires de grande ampleur. L’étude apporte la preuve que la part très importante de la population active résultant du déclin récent de la fécondité ne pourra pas se maintenir, et que des baisses significatives de cette part sont à prévoir. Si des ajustements importants en matière de participation au marché du travail ou de politiques migratoires ne sont pas mis en œuvre, les répercussions négatives sur l’économie européenne pourraient être considérables.
This is a preview of subscription content, log in to check access.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
Gabon is an exception to this pattern.
It should be noted that by 1960 most of the demographic transition had been completed in European countries.
A stable population refers to a population that has constant age-specific fertility and mortality rates, which, in the absence of migration, implies a constant age structure and constant population growth.
The total number of births is the age-group-specific population times f/2. Thus, to get a birth cohort size of 1, we need a “parent cohort” population of 2/f.
In the case with zero mortality before old age, replacement fertility equals 2.
In this stylized framework, we assume for analytical simplicity that agents die either at the end of the second or the end of the third period. One can, however, interpret σ as the average fraction of people from the previous cohort still alive over the last period of life, in which case death could occur any time during the last period of life.
We restrict the domain of our analysis to the set of positive real numbers.
As this fertility rate can be above or below the replacement fertility rate, the working-age-share maximizing stable population fertility rate parameter will lead to positive, zero, or negative population growth. Thus we cannot assert that the fertility rate that maximizes the working-age share is the “optimal” fertility rate—the population growth consequences may impose a negative effect on economic growth.
We initiate the simulation with a flat age structure, and then impose constant age-specific fertility and mortality rates to impute the stock of each age group in each period. It takes up to 200 simulated periods for age structure to converge to a stable population distribution. In Fig. 4 we show the resulting stable population working-age share for three examples of mortality schedules and fertility rates between zero and ten.
Aarssen, L. W. (2005). Why is fertility lower in wealthier countries? The role of relaxed fertility-selection. Population and Development Review, 31(1), 113–126.
Adsera, A. (2006a). An economic analysis of the gap between desired and actual fertility: The case of Spain. Review of Economics of the Household, 4, 75–95.
Adsera, A. (2006b). Marital fertility and religion in Spain, 1985–1999. Population Studies, 60(2), 205–221.
Becker, G. S., Glaeser, E. L., & Murphy, K. M. (1999). Population and economic growth. American Economic Review, 89(2), 145–149.
Billari, F., Frejka, T., et al. (2004). Discussion of paper ‘Explanations of the fertility crisis in modern societies: A search for commonalities Population Studies 57(3): 241–263, by John Caldwell and Thomas Schindlmayr. Population Studies 58(1): 77–92.
Billari, F., & Kohler, H.-P. (2004). Patterns of low and lowest-low fertility in Europe. Population Studies, 58(2), 161–176.
Bjorklund, A. (2006). Does family policy affect fertility? Lessons from Sweden. Journal of Population Economics, 19, 3–24.
Blondal, S., & Scarpetta, S. (1999). The retirement decision in OECD Countries. OECD Economics Department working paper 202.
Bloom, D. E., Canning, D., Fink, G., & Finlay, J. E. (2007a). Fertility, female labor force participation, and the demographic dividend. Journal of Economic Growth (Forthcoming).
Bloom, D. E., Canning, D., Mansfield, R. K., & Moore, M. (2007b). Demographic change, social security systems and savings. Journal of Monetary Economics, 54, 92–114.
Bloom, D. E., Canning, D., & Sevilla, J. (2003). The demographic dividend: A new perspective on the economic consequences of population change. Population matters monograph MR-1274. Santa Monica: RAND.
Bloom, D. E., & Freeman, R. B. (1986). The effects of rapid population growth on labor supply and employment in developing countries. Population and Development Review, 12(3), 381–414.
Bloom, D. E., & Freeman, R. B. (1987). Population growth, labor supply, and employment in developing countries. In D. G. Johnson & R. D. Lee (Eds.), Population growth and economic development: Issues and evidence. Wisconsin: University of Wisconsin press.
Bloom, D. E., & Freeman, R. B. (1988). Economic development and the timing and components of population growth. Journal of Policy Modeling, 10(1), 57–81.
Bongaarts, J., & Bulatao, R. A. (1999). Completing the demographic transition. Population and Development Review, 25(3), 515–529.
Brander, J. A., & Dowrick, S. (1994). The role of fertility and population in economic growth. Journal of Population Economics, 7(1), 1–25.
Brewster, K. L., & Rindfuss, R. R. (2000). Fertility and women’s employment in industrialized nations. Annual Review of Sociology, 26(1), 271–296.
Coleman, D. (2006). Immigration and ethnic change in low-fertility countries: A third demographic transition. Population and Development Review, 32(3), 401–446.
Deardorff, A. V. (1976). The optimum growth rate for population: Comment. International Economic Review, 17(8), 510–515.
Ehrlich, P. R. (2008). Demography and policy: A view from outside the discipline. Population and Development Review, 34(1), 103–113.
Ehrlich, I., & Kim, J. (2007). Has social security influenced family formation and fertility in OECD countries? An economic and econometric analysis. NBER working paper 12869.
Engelhardt, H., & Prskawetz, A. (2004). On the changing correlation between fertility and female employment over space and time. European Journal of Population, 20, 35–62.
Eurostat (2008). Online statistics: Population by citizenship-Foreigners. http://ec.europa.eu/eurostat. Accessed 15 March 2008.
Fernandez, R., & Fogli, A. (2006). Fertility: The role of culture and family experience. Journal of the European Economic Association, 4(2), 552–561.
Feyrer, J. (2007). Demographics and productivity. Review of Economics and Statistics, 89, 100–109.
Feyrer, J., Sacerdote, B., & Stern, A. D. (2008). Will the stork return to Europe? Understanding fertility within developed nations. Journal of Economic Perspectives, 22(3), 3–22.
Galor, O. (2005). The demographic transition and the emergence of sustained economic growth. Journal of European Economic Association, 3(2–3), 494–504.
Galor, O., & Weil, D. N. (1999). From Malthusian stagnation to modern growth. American Economic Review, 89(2), 150–154.
Galor, O., & Weil, D. N. (2000). Population, technology, and growth: From Malthusian stagnation to the demographic transition and beyond. American Economic Review, 90(4), 806–828.
Garrido, L. J., & Malo, M. A. (2005). Postponement of family formation and public budget: Another approach to very low fertility in Spain. Public Finance and Management, 5(1), 152–177.
Gruber, J., & Wise, D. (1998). Social security and retirement: An international comparison. The American Economic Review, 88(2), 158–163.
Gruber, J., & Wise, D. A. (1999). Social security and retirement around the world. Chicago: The University of Chicago Press.
Gruber, J., & Wise, D. A. (2004). Social security programs and retirement around the world: Micro-estimation. Chicago: The University of Chicago Press.
Hock, H., & Weil, D. N. (2007). Modeling the effects of population aging on consumption in the presence of intergenerational transfers. In R. Clark, N. Ogawa, & A. Mason population aging, intergenerational transfers and the macroeconomy. Northampton, MA: Edward Elgar.
ILO Bureau of Statistics. (2007). ILO database on labour statistics. Geneva, Switzerland: International Labour Organization.
Kelley, A. C. (1988). Economic consequences of population change in the third world. Journal of Economic Literature, 26, 1685–1728.
Kelley, A. C., & Schmidt, R. M. (1995). Aggregate population and economic growth correlations: The role of the components of demographic change. Demography, 32(4), 543–555.
Kelley, A. C., & Schmidt, R. M. (2005). Evolution of recent economic-demographic modeling: A synthesis. Journal of Population Economics, 18(2), 275–300.
Kohler, H.-P. (2006). Determinants of low fertility in Europe. Entre Nous 63.
Kohler, H.-P., Billari, F. C., & Ortega, J. A. (2002). The emergence of lowest-low fertility in Europe during the 1990s. Population and Development Review, 28(4), 641–680.
Lee, R., & Mason, A. (2008). Fertility, human capital, and economic growth over the demographic transition. Berkeley: Mimeo
Lesthaeghe, R., & Willems, P. (1999). Is low fertility a temporary phenomenon in the European Union? Population and Development Review, 25(2), 211–228.
Lutz, W., & Skirbekk, V. (2005). Policies addressing the tempo effect in low-fertility countries. Population and Development Review, 31(4), 699–720.
Malmberg, B. (2008). Global population ageing, migration and European external policies. Stockholm: Institute for Future Studies.
McDonald, P. (2006). Low fertility and the state: The efficacy of policy. Population and Development Review, 32(3), 485–510.
McDonald, P. (2008). Very low fertility: Consequences, causes and policy approaches. The Japanese Journal of Population 6(1), 19–23.
Samuelson, P. A. (1975). The optimum growth rate for population. International Economic Review, 16(3), 531–538.
Samuelson, P. A. (1976). The optimum growth rate for population: Agreement and evaluations. International Economic Review, 17(2), 516–525.
Simon, J. L. (1996). The ultimate resource 2. Princeton University Press: Princeton.
Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65–94.
Strulik, H. (2005). The role of human capital and population growth in R&D-based models of economic growth. Review of International Economics, 13(1), 129–145.
United Nations (2007). World population prospects: The 2006 revision. CD ROM.
Vlasblom, J. D., & Schippers, J. J. (2004). Increases in Female Labour Force Participation in Europe: Similarities and Difference. Tjalling C. Koopmans Research Institute Discussion Paper Series. nr. 04–12.
Weil, D. N. (1999). Population growth, dependency, and consumption. American Economic Review, 89(2), 251–255.
World Bank. (2007). World Bank development indicators CD-ROM. Washington, DC: World Bank.
World Health Organization. (1999). Life tables for WHO member states. Geneva: World Health Organization. http://www.who.int/whosis/database/life_tables.cfm. Accessed 15 March 2008
This article 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.
About this article
Cite this article
Bloom, D.E., Canning, D., Fink, G. et al. The Cost of Low Fertility in Europe. Eur J Population 26, 141–158 (2010). https://doi.org/10.1007/s10680-009-9182-1
- Population dynamics
- Economic growth
- Dynamique des populations
- Croissance économique