Less is Better: Reducing Birthrate Leads to Prosperity?

Interesting findings, in many respects refuting the popular belief that declining birth rates and aging societies incur only losses for the country, were made by David Bloom, professor of economics and demography at Harvard University, in a paper published in the Finance and Development publication of the International Monetary Fund. There are pluses to this demographic process, Bloom argues:

“Changes in the age structure can contribute to economic growth, creating the possibility of receiving the so-called demographic dividend - an increase in per capita income due to a decrease in fertility, which reduces the burden associated with youth addiction, increases the share of workers and savers in the population, and allows resources from raising children to building factories, building infrastructure, and investing in education and research and development.

Declining fertility also tends to free women from childbearing and raising children, further increasing the labor supply. Likewise, savings rates tend to increase with increased adult survival and expected longer periods of retirement, especially in countries where policies and organizations have constrained employment for people over 60–65 years of age. The demographic dividend represents an opportunity to generate rapid income growth and reduce poverty. It can be catalyzed by policies and programs to reduce infant and child mortality, and it can be accelerated by measures that reduce fertility, such as increasing access to primary health care and reproductive health care and education for girls.

However, the demographic dividend does not occur automatically. Its receipt depends on key aspects of the economic and legal environment, such as the quality of public administration, macroeconomic management, trade policy and infrastructure; labor market and financial market efficiency and levels of public and private investment in health, education and training. In recent decades, various countries have received demographic dividends, most notably the "East Asian tigers" (Hong Kong, South Korea, Singapore and Taiwan, province of China), which sharply reduced their fertility in the 1960s and 1970s and, taking advantage of the resulting respite economies have achieved remarkable success through sound education and health policies, sound macroeconomic management, and prudent engagement with countries in the region and the world.

In these countries, more than 2 percentage points of annual growth in per capita income (approximately one third of total annual growth) is attributable to declining fertility and the associated sharp increase in the share of the working-age population between 1965 and 2000..."