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Secular Fertility Declines Hinder Long-Run Economic Growth

Huang, Kaixing (2018): Secular Fertility Declines Hinder Long-Run Economic Growth.

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Abstract

To address the endogeneity bias of early cross-country studies of the effect of fertility on economic growth, later studies adopt panel models with fixed effects. However, the fixed effects eliminate long-term fertility differences, and thus the estimation captures mainly the short-term effect. To capture the long-term effect while addressing endogeneity, this article estimates a long-term lagged panel model using one-off fertility shocks. Based on the data from 138 countries from 1960 to 2016, this article found that an increase in fertility first reduces and then increases economic growth, and the long-term average effect is significantly positive. Comparable results are obtained when focusing on countries in different development levels or using within-country variation from China’s one-child policy. This finding explains why previous studies, which differently capture the long-term effect of fertility, obtain mixed results. More importantly, it suggests that anti-natalist policies prevalent in the developing world may hinder long-run economic growth.

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