Bocconi

Dondena Initiatives highlight current and prospective research pursued by our faculty in societally-relevant areas which might be appealing for external donors.

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The Age of Falling Fertility

The Age of Falling Fertility

Nicolò Cavalli, Letizia Mencarini

 

Demography shapes the economy by determining the size of the labor force; the relation between consumption and savings; the sustainability of welfare setups. In 2005, former Fed governor Ben Bernanke presciently said: “Populations of [US, euro area, Japan] are both growing slowly and aging rapidly, implying that the ratios of retirees to workers will rise sharply in coming decades […]. Basic economic logic thus suggests that, in the longer term, the industrial countries as a group should be running current account surpluses and lending on net to the developing world, not the other way around.” This way, they would enjoy higher returns and diversification, while borrowers in emerging economies would be obtaining the capital investment needed for growth and increasing living standards. 

But today global savings are not being absorbed by productive investments in emerging economies. Rather, they are borrowed by the world’s richest countries, especially the United States, and their governments. This encourages capital misallocation and rent-seeking in the economy – linked to sluggish innovation and lower-than-potential growth.

Future population projections further suggest that, in the next decades, large economies like China and India will deepen their position of net international creditors, potentially leading to a rebalancing of savings, investments and asset accumulation which may affect the global economy and the equilibrium between nations.

This Initiative takes on these global challenges from a demographic perspective, studying key aspects of population change across the world, with a special focus on Europe. What motivates fertility today and what are the desires among the new generations? How does increased longevity affect the economy and savings? How do people, firms and institutions adapt to population change? What implications for social insurance systems and migration policies? The Initiative addresses these questions with the goal of promoting equitable growth, and to help build systems resilient to global demographic challenges.

 

Research highlights