Works in Progress Podcast The economics of the baby bust with Jesús Fernández-Villaverde
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Nov 6, 2025 Jesús Fernández-Villaverde, a Professor of Economics at the University of Pennsylvania, dives into the pressing issue of declining birth rates. He explains how low fertility impacts GDP and social systems, showcasing Japan and South Korea as examples of potential resilience. Jesús critiques current childcare subsidies and highlights the influence of social norms on fertility patterns. He advocates for housing policies as a means to boost birth rates, while also discussing the pitfalls of excessive education and its effect on family formation.
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Demographic Cliff Lowers GDP Growth
- Very low fertility creates a demographic cliff that shrinks total GDP unless offset by large immigration or productivity gains.
- Falling labor growth reduces aggregate growth even if productivity per worker stays steady.
Uneven Decline Creates Local Collapse
- Population decline is spatially uneven: big cities can gain while rural areas shrink dramatically.
- Local collapses force costly closures of schools, hospitals and services, disrupting communities.
Japan Is A Best-Case Muddle-Through
- Japan muddled through partly by indexing social security to demographics and reforming benefits.
- East Asian social consensus made painful reforms politically feasible, limiting market panic.