Economies thrive with older, smaller population, new study finds

Declining birth rates around the world have gotten many people worried about the economic impact, with predictions of slower growth and less innovation. But a new paper finds that the opposite may be true.

Ageing and shrinking populations have historically raised an economy’s output per worker and had no damping effect on overall gross domestic product, according to a new study by Daron Acemoglu – who won the Nobel economics prize in 2024 – David Autor, Keelan Beirne and Andrew Scott.

It finds that workers and companies turn to technology to augment a reduced labour force, raising the productivity of each worker.

“Our findings challenge the prevailing pessimism: lower birth rates, and the ageing and shrinking populations they have produced, have raised rather than lowered GDP per ‘worker,’” the authors write in a paper distributed by the National Bureau of Economic Research. That gain “has been large enough to fully offset the negative effect of population decline, leaving aggregate GDP broadly unaffected.”

Birth rates have declined in all continents over the past 70 years. Globally, the rate has fallen from 3.78 per 100 people in 1950 to 1.71 in 2025, according to the paper. But each percentage-point drop led to a 26.8 per cent increase in GDP per worker.

“In cross-country data, declining birth rates lead to higher total factor productivity, larger capital stocks, a shift toward exports in high-tech industries, and more labour-saving patenting,” the authors write.

In the US, the result has been a shift of workers toward high-tech industries and an increase in patents of labour-saving inventions.

“It is this technological response that produces the positive relationship between baby busts and subsequent growth booms,” the authors argue.

They examined other possible ways that lower birth rates could drive higher productivity – by enabling more women to work, or facilitating a transition from agriculture to manufacturing – but found no evidence that they had a significant effect.

Acemoglu and Autor are economics professors at the Massachusetts Institute of Technology, Beirne is a doctoral student in economics there and Scott is an economics professor at the London Business School. BLOOMBERG