Fertility rates are falling across the globe. In countries like South Korea, the average number of children per woman has dropped below one. Even in developing economies like India or Brazil, fertility has halved within a single generation. What does this demographic shift mean for our economies? Can technological progress or migration fill the gap left by a shrinking workforce? And will fewer people lead to slower innovation?

Maura Wyler-Zerboni (Text)

These were some of the questions addressed by Michael Peters, Associate Professor of Economics at Yale University and CEPR Affiliate, during a recent UBS Center webcast, hosted by Maya Eden, UZH Professor of Economics and Affiliated Professor at the UBS Center and CEPR. Drawing on historical data, empirical research, and real-world examples, Peters explored the economic implications of declining population growth – and why it matters for our future.

From boom to bust – a reversal of demographic worries

Back in the 1960s, the fear was overpopulation. Paul Ehrlich’s bestselling book The Population Bomb predicted mass starvation and ecological collapse. Fast forward to today, and the headlines have flipped: South Korea is “disappearing,” Europe is “turning gray,” and the world may soon face a population implosion.

The numbers tell a striking story. Global population growth peaked around 1960 at 2% per year. Since then, it has steadily declined to around 0.7% today. UN projections suggest that by 2070, population growth will fall below zero, meaning the global population will start shrinking. This trend is especially stark in formerly fast-growing countries. South Korea’s population growth dropped from 3% in 1960 to near zero today. India, China, and Brazil have all seen similar patterns. Even developed economies like Switzerland and the U.S. have fertility rates below the replacement level.

And it’s not because people are dying faster – on the contrary, life expectancy has soared. In Switzerland, it rose from about 70 years in 1960 to over 80 today. In India, it jumped from 45 to 65 years in the same period. The decline in population growth is almost entirely due to lower fertility.

Fewer births, fewer ideas?

Falling fertility is more than just a demographic shift – it’s a macro trend that touches every part of society, from pension systems to climate policy to political power. As Peters put it, declining population growth raises deep and wide-ranging questions: Are today’s low birth rates a reflection of greater autonomy and opportunity – or a sign of systemic constraints? Should we see them as progress, or cause for concern?

While these are important debates, Peters focused on one particular angle: the link between population and economic productivity. If fewer people are born, will fewer ideas follow? To explore this, he contrasts two powerful economic frameworks. In the Malthusian model, dating back to the 18th century, more people meant lower living standards – too many mouths to feed, too few resources. But the modern “Romerian” view, named after Nobel laureate Paul Romer, flips the narrative: more people don’t just consume – they innovate. People generate ideas, and ideas fuel economic growth.

This is especially crucial because ideas are non-rival: unlike physical goods, they can be shared, reused, and built upon endlessly. “If everybody has the same idea, there’s a lot of replication,” Peters noted. “But if you have different ideas, that’s where you get big productivity consequences.” So if fewer people are born, the concern isn’t just about who will pay for pensions – it’s about whether innovation itself will slow down. And this isn’t just theoretical. Peters presented two empirical studies that reveal just how closely population dynamics and productivity are linked.

Germany’s refugees as a natural experiment

The first study looks at post-World War II Germany, which received eight million ethnic German refugees after losing its eastern territories. These refugees were distributed across West Germany not by choice, but by policy – creating a “natural experiment”. Some areas received far more refugees than others. And decades later, these areas weren’t just larger – they were also richer. Even 30 or 40 years on, areas with higher refugee inflows had higher income per capita. The evidence supports the Romerian perspective: a population boost triggered more innovation, more economic activity, and more growth.

Fewer firms, slower growth

In a second study, Peters and co-author Conor Walsh examine how fewer people translate into fewer firms. In the U.S., the rate at which new firms are created fell from 12% in 1980 to 8% by 2020. This decline mirrors the fall in population growth. Since new firms are often carriers of new ideas and technologies, a lower “entry rate” hampers innovation and slows productivity growth. Quantitatively, Peters estimates that this drop in firm creation has reduced U.S. productivity growth by 0.2 percentage points – down from 1.8% to 1.6% per year. It may not sound like much, but over time, small changes in growth rates make a big difference.

Can immigration fill the gap?

If fertility rates are falling, could migration be the solution? In the U.S., net immigration of about one million people per year (roughly 0.3% of the population) has kept population growth positive. Switzerland shows a similar pattern: a fluctuating but mostly positive net migration rate has helped maintain modest population growth. To keep its population stable, Switzerland needs a net inflow of about 40,000 people annually. While immigration can mitigate the demographic slowdown in wealthy countries, Peters warned that this raises complex ethical questions. For poorer countries, emigration can drain human capital, compounding global inequality.

A future powered by technology?

Could technology – especially AI – help us generate new ideas even as population growth stalls? That was one of the questions raised in the discussion moderated by Maya Eden. If AI can enhance our capacity to innovate, perhaps we won’t “run out of ideas” even as we run out of people. Peters agreed that this is a key area for future research and highlighted it as a potential bright spot in an otherwise sobering demographic outlook.

Complex Trade-Offs Ahead

The conversation also touched on broader questions. Should governments try to raise fertility rates? Can innovation be green? Is it time to rethink an economic model based on endless growth? Peters emphasized the complexity of these issues. Fertility is deeply personal and resistant to policy nudges. Moreover, we must distinguish between growth based on quantity (more people, more output) and growth based on quality (better products, less environmental damage). The future may require a shift from one to the other.

As Professor Eden noted, the so-called demographic dividend – from rising education, urbanization, and female labor participation – may soon reach its limits. When that happens, the negative effects of declining population on innovation may become more visible.

Watch the full webcast

Falling population growth is no longer just a demographic curiosity – it’s a central challenge for economies around the world. If you’re interested in how demographics shape our future, don’t miss this thought-provoking presentation.