Jesús Fernández-Villaverde: Global fertility rates are below replacement levels, low fertility poses challenges to welfare states, and the quality-quantity trade-off explains declining birth rates | Macro Musings

Global fertility decline poses a critical challenge to future economic stability and welfare systems worldwide.

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Add us on Google by Editorial Team Mar. 25, 2026

Key takeaways

• Demographic changes, particularly low fertility rates, are crucial to the future of the welfare state.
• Global fertility rates are below replacement levels, impacting population dynamics worldwide.
• Declining fertility is a global phenomenon, not limited to developed countries.
• By 2040-2045, significant societal changes are expected due to low fertility rates.
• Misconceptions about fertility often overlook its global impact.
• The quality-quantity trade-off in economics explains declining fertility rates.
• Countries like Chile and China have seen unprecedented drops in fertility since 2013.
• Total fertility rate and completed fertility are distinct and require different timeframes for analysis.
• International fertility data can be inaccurate compared to national statistics.
• Low interest rates result in higher housing prices due to valuation effects.
• Understanding demographic trends is crucial for policy and economic planning.
• The global decline in fertility rates will have profound implications on economic structures.
• Accurate demographic data is essential for effective policy-making and research.
• The economic model linking modernization to fertility rates offers insights into global trends.
• Housing market dynamics are significantly influenced by interest rates.

Guest intro

Jesús Fernández-Villaverde is the Howard Marks Presidential Professor of Economics at the University of Pennsylvania. He directs the Penn Initiative for the Study of Markets and is a Research Associate at the National Bureau of Economic Research. His research examines macroeconomics, economic history, and demographic challenges including global population decline.

The impact of demographic changes on welfare states

• The sustainability of welfare states is closely linked to demographic shifts, especially low fertility rates.

• I started looking a lot into the big two items in government expanding right now which is social security benefits and health expenditure for all elder people.

  — Jesús Fernández-Villaverde

• Social security systems are heavily impacted by demographic trends.
• Immigration policies are intertwined with social security and fiscal policy.

• I started thinking very very seriously about social security and exactly how social security interacts for instance with issues like the fiscal policy but also with immigration.

  — Jesús Fernández-Villaverde

• Low fertility rates pose challenges to government spending on social security.
• Understanding these demographic implications is crucial for future policy planning.
• The relationship between demographics and welfare state sustainability is a significant topic in economic policy discussions.

Global fertility rates and their implications

• Humanity is currently below the replacement fertility rate globally.

• The planet is at 2.17 2.15… when you are talking about fertility decline most people are thinking about the US… what most people are not thinking is about Jamaica.

  — Jesús Fernández-Villaverde

• Declining fertility rates are a widespread phenomenon, not limited to developed countries.

• Fertility in Jamaica is probably around 1.4 to put it in perspective in the US it’s 1.6… it’s a sign of how widespread the declining population is worldwide.

  — Jesús Fernández-Villaverde

• Fertility rates are declining globally, including in regions like sub-Saharan Africa.
• By 2040-2045, significant societal changes are expected due to low fertility rates.

• So my view of the world is that in 2040 2045 we are going to see articles in the newspaper talking about how incredibly low fertility is in Africa.

  — Jesús Fernández-Villaverde

• Misconceptions about fertility rates often overlook their global impact.

The economic model of fertility decline

• The decline in fertility rates can be explained by the quality-quantity trade-off in economics.

• As an economic grows as we modernize as getting more and more education is a good idea families decide endogenously to have much fewer children.

  — Jesús Fernández-Villaverde

• Modernization and education lead families to have fewer children.
• There has been an unprecedented decline in fertility rates in countries like Chile and China since 2013.

• You have countries like Chile with fertility rates of one point o you have countries like China with fertility rates of point eight nine which is absolutely unprecedented it has never happened.

  — Jesús Fernández-Villaverde

• Understanding this economic model is crucial for analyzing global fertility trends.
• The quality-quantity trade-off offers insights into the observed decline in fertility rates.
• This model helps explain the widespread nature of declining fertility rates.

Distinguishing between total fertility rate and completed fertility

• The total fertility rate and completed fertility are distinct concepts that require different timeframes for accurate assessment.

• The total fertility rate is the number of children that a woman will have if she behaves as other women at this moment in the population… completed fertility is the fertility that a 20 year old woman today will have at the end of her fertile years.

  — Jesús Fernández-Villaverde

• Understanding these differences is crucial for demographic analysis.
• Accurate assessment of fertility rates requires knowledge of these distinct concepts.
• The distinction between these rates is fundamental for interpreting fertility data.
• This understanding is essential for effective policy-making and research.
• Misinterpretations of fertility data can lead to flawed demographic analyses.
• Awareness of these concepts is crucial for accurate demographic research.

The reliability of fertility data sources

• The fertility data from international agencies like the World Bank is often incorrect compared to national statistical agencies.

• The answer is yes because those numbers are wrong… all the numbers I use are from the national statistical agencies of every country.

  — Jesús Fernández-Villaverde

• Awareness of the reliability of different data sources is important for accurate demographic research.
• Using accurate data sources is crucial for effective policy-making and research.
• National statistical agencies provide more reliable fertility data than international agencies.
• Misleading data can significantly impact research outcomes and policy decisions.
• Accurate demographic data is essential for understanding global trends.
• Researchers must critically evaluate the sources of their demographic data.

The effect of low interest rates on housing prices

• Low interest rates lead to higher housing prices due to the present discounted value of housing services.

• Think about a house price as just the present discounted value of the flow of housing services you get from it when r star for whatever the reason is very low it means that that net present discounted value is very high.

  — Jesús Fernández-Villaverde

• Understanding the relationship between interest rates and housing market dynamics is crucial.
• Low interest rates create a valuation effect, driving up housing prices.
• The housing market is significantly influenced by changes in interest rates.
• This economic principle is essential for understanding current market trends.
• The impact of interest rates on housing prices has broad economic implications.
• Policymakers must consider these dynamics when addressing housing affordability issues.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.