The Effect of Fertility Decline on Economic Growth in Africa: A Macrosimulation Model

Worldwide, both mortality and fertility rates are on the decline, with the shift occurring in Sub-Saharan Africa a few decades ago. Fertility decline occurs in the latter stages of ‘demographic transitions,’ during which countries experience declining mortality and fertility rates as they develop economically. Demographic transitions have come to be associated with socioeconomic progress, and declines in fertility can portend a window of opportunity for economic growth. 

In a new journal article published in Population and Development Review, HCI Associate Director Mahesh Karra, David Canning and Joshua Wilde construct a macrosimulation model of economic growth to examine the positive economic effects of fertility decline in Africa. What sets their model apart from others is the inclusion of three key mechanisms that are traditionally excluded from similar analyses: the effect of fertility decline on children’s health; the effect of fertility decline on population age structure and household savings rates; and the relationship between education and fertility rates. 

When the authors ran demographic data from Nigeria through the model, they found evidence of larger positive effects of fertility decline relative to previous approaches, which, in turn, contribute to faster economic growth. In particular, the model associated lowering the total fertility rate by one child per woman with an almost twofold increase in income per capita by 2060. 

The authors comment that, “In the short to medium run, the main reason for the higher income effects in our model is the larger share of the workforce that moves into the modern sector of the economy when fertility is low. In the long run, lower fertility increases female education, which in turn lowers fertility in the next generation and produces a multiplier effect from any initial change in fertility.”

There are many components to economic development, and the authors note that fertility decline alone cannot transform a developing country into a developed one. Nevertheless, their findings suggest investments in health and education that are traditionally associated with lower fertility rates have the power to make a “substantial contribution” to economic development in Africa.