January 31, 2024
Hoover Institution | Stanford University
Jesús Fernández-Villaverde, the Howard Marks Presidential Professor of Economics at the University of Pennsylvania, discussed “The Wealth of Working Nations,” a paper with Gustavo Ventura (Arizona State University) and Wen Yao (Tsinghua University).
PARTICIPANTS
Jesús Fernández-Villaverde, John Taylor, Annelise Anderson, Michael Boskin, Doug Branch, Pedro Carvalho, John Cochrane, Chris Dauer, Steve Davis, Sebastian Di Tella, David Fedor, Jared Franz, Bob Hall, Adele Hayutin, Gregory Hess, Laurie Hodrick, Robert Hodrick, Chad Jones, Ken Judd, Matthew Kahn, Pete Klenow, Evan Koenig, David Laidler, Oliver Landmann, John Lipsky, Lee Ohanian, Robert Oster, Radek Paluszynski, Elena Pastorino, Paul Peterson, Alvin Rabushka, Valerie Ramey, Richard Sousa, Tom Stephenson, Jack Tatom, George Tavlas, Yevgeniy Teryoshin, Chris Tonetti, Victor Valcarcel, Gustavo Ventura
ISSUES DISCUSSED
Jesús Fernández-Villaverde, the Howard Marks Presidential Professor of Economics at the University of Pennsylvania, discussed “The Wealth of Working Nations,” a paper with Gustavo Ventura (Arizona State University) and Wen Yao (Tsinghua University).
John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Shultz Senior Fellow in Economics at the Hoover Institution, was the moderator.
PAPER SUMMARY
Due to population aging, GDP growth per capita and GDP growth per working-age adult have become quite different among many advanced economies over the last several decades. Countries whose GDP growth per capita performance has been lackluster, like Japan, have done surprisingly well in terms of GDP growth per working-age adult. Indeed, from 1998 to 2019, Japan has grown slightly faster than the U.S. in terms of per working-age adult: an accumulated 31.9% vs. 29.5%. Furthermore, many advanced economies appear to be on parallel balanced growth trajectories in terms of working-age adults despite important differences in levels. Motivated by this observation, we calibrate a standard neoclassical growth model in which the growth of the working-age adult population varies in line with the data for each economy. Despite the underlying demographic differences, the calibrated model tracks output per workingage adult in most economies of our sample. Our results imply that the growth behavior of mature, aging economies is not puzzling from a theoretical perspective.
To read the paper, click the following link
https://www.sas.upenn.edu/%7Ejesusfv/Wealth_Working_Nations.pdf
To read the slides, click the following link
https://www.hoover.org/sites/default/files/2024-02/Slides_Hoover.pdf
Okay we’re very happy to have Jesus speak us today he’s the Howard Marx presidential professor of Economics I so how trick at the University of Pennsylvania as PD from Minnesota was a national fellow here in 2014 2015 is what I have and an adviser to a regulation rule of
Law initiative I say one of my favorite papers uh published it’s called solution and estimation methods for dsge models if you remember this it’s 186 pages long anyway it’s in the handbook of ma economic but today we’re gonna hear about a paper called the wealth of
Working Nations which is a lot of the title and Gustavo is up on the screen somewhere coauthor but the other co-author W ya is not here so take it away is this okay thanks hello lot thanks for having me as I as John was mentioning this is join work with
Gustavo at Arizona State and with W Yao at chinua and because of the time difference she cannot be here otherwise she will be happy um so the the motivation for this paper is super easy super simple and in fact you can get the point of this paper in 30
Seconds basically as the population of advanced economies age output growth per capita is becoming an increasingly misleading indicator for growth Theory okay we are not going to claim that output per capita growth is not useful I have some slides about that later I want to make just the point that one needs to
Be very careful when you use it and the reason for that is that changes in the working age population in particular as the ratio with respect to total population have been so big over the last 20 years that output growth per capita can hide important movements in output in per
Worker terms in per working age adults and I’m just sorry one second I’m going to put the time so I can of keep a an eye on my on the time but before anyone ask I’m going to define a per working age adult as all the statistical agencies in the world do
Which is an adult between 15 and 64 years old uh some of you may think that you are outside that bound I promise I will come back to that later okay but just as a first pass and the reason why we think the output per working age
Adult is a useful measure is because it’s a measure of how much we can produce given the available amount of adults in the economy and the prevailing social norms and prevailing social norms I mean the fact that in most societies we do not think that children below 14
Should work and that in most societies ER you have some idea of retirement where most people after 65 and retire of course there are two caveats that I want to be very obvious and very open about them right away first yes we are aware that some adults
Over 64 continue working and as I mention I promise I’m going to come back to that later on and yes we are aware that there are other possible measures and you know the first comment I always get when I talk about this paper is why don’t GDP per worker per hour work again
I promise I will come back to that so just give me a few seconds to to to discuss those now this matters and this matters a lot so if you ask the average economics journalist or even the average microeconomist who is the poster child of bad economic performance over the
Last 30 years chances are they are going to say Japan okay and the numbers they are going to tell you is that between 1990 and 2019 GDP in Japan grew at an annual rate of 93 while in the US it was at 2.49 and because of that there is a
Small library of books and volumes and volumes of journals filled with papers on the economic struggles of Japan one book that was a bestseller back in the day in 2014 was by pesek which I I think was the financial times correspondent in Japan for a long time and he popularized
The term japanization I guess was probably around before that so A few lessons are more timely or critical than those offered by Japan a once vibrant model for developing economies and look at what it says later that means exploring where Japan went B how it sank under the weight of haris and political
Atrophy and Miss opportunity after opportunity to scrap an insular model based on overinvestment export L growth and excessive debt so that was quite an indictment but what happens well of course people say let me tell you my favorite policy recommendation okay so this is just not mentioning that Japan
Is not doing very well they say well maybe Japan should have done more aggressive fiscal or monetary policy maybe we should Japan should have undertaken more structural reforms and if anyone cares the audient story of this paper is that a very prominent member of the economics profession much
More prominent than I am came to pen and talk for 90 minutes in the seminar in the macro seminar about why everything that went wrong with Japan was the fault of the bank of Japan and I thought that doesn’t make a lot of sense I you know
Tried to explain my displeasure but I was you know brushed aside so what I did was to go back and I look at output per working age in Japan and when you do that since 1990 to today it turns out to be the case that Japan has grown at
1.44% a year okay what is the difference between in the previous slide 93 and now 1.44 well basically that working age population in Japan has been falling at around half a percent a year while the us has grown at a 156% and you know 156 is a little bit
More than 144 but it’s not a big difference and why the US has been growing much faster well because the US has brought in a lot of immigrants just truly to begin with since 1990 I came to the US in 1996 so since 1997 I guess that I got a job at
The Minneapolis fed I count as part of the working force in the United States good thing you came well that’s the counteract well you never know but anyway the point I’m trying to make is you look at Japan in working age population you look at the US in working
Age population it doesn’t strike you like these two countries are doing much worse than each other in fact I’m going to do a little bit of reverse engineering so let me try to get this right because sometimes people get confuse I’m going to stop at 2019
Because it’s where our data set ends and actually is good because it’s before the start of covid so there is no contamination because of covid and I’m going to say let me go back in time until the year such that the US and Japan has grown the same amount and that
Happens to be 1999 now because years coming integer units 1998 Japan has grown a little bit more since 1998 but basically the point is between 1998 and 2019 the US and Japan have done exactly the same in terms of working age adult and I think that once you see this
And you think about it maybe Japan is not doing so bad after all yeah the the um Japan is still has a level effect us that’s Japan could do better exactly and that’s that’s one of the things we are going to H to to mention that the surprising thing is
That in the model or sorry in the data we are going to see that suddenly there is a mat closer bunching of countries in terms of their per working age population growth which suggest that all these countries are growing through some type of balance growth path but there is
No catching up at all right so to me one of the most amazing things is basically since the early 1980s mid 1980s no catch up at all no convergence at all among rich countries and I presume we’re going to get to labor force participation and choice of hours work which is why Europe
Is 40% poorer than exactly so that’s the very next slide okay so again when this paper circulated that was the first question that I got but but but what about old people working okay and my answer is look I would love to have more disaggregated data of exactly how much older people are
Working how much they are contributing to GDP Etc unfortunately the national income and pro accounts of most countries do not have a very good information on that what I can tell you is the following in 1990 24.3% of adults in Japan 65 and older were working in 2019 it was
25.3 so it has gone up a little bit but very little older people in Japan have always work now when you look at the US that same r rate has gone from 11.8% to 20.2% so if I had access to some measure of disaggregated output produced by
People of certain age my guess and again this is a conjecture I want to be very clear is that the case in favor of Japan will be even stronger because the US has put another 10% of their older people to work Japan has only put 1%
Okay and this is a case where if anyone has an idea of how it could look at the Micro Data and you know somehow reverse engineer at the composition I would love to hear about it but hey this take into account the number of people who are old
Why not just do it for the US and Japan you could do it for other countries it might be harder but 15 and older you could show us that ratio exactly yeah I guess I could do that I could do something like that well on so there’s
The genie paper cap and the GDP per worker and the issue is the incentives to work a Carter once you get over 65 countries have all sorts of exactly and that’s different across countries and that’s in fact the very next slide okay so participation rate participation rate in Spain for people over 65
2% and this basically I can give you the reason in Spain and in most other European countries if you are working you don’t get your Social Security check so it’s just you are basically leaving money on the table by working you take account of all the income taxes you are
Going to pay and you substract the fact that you’re not getting a social security check you actually lose money by working so the amazing thing is that still 2% of people like to work okay and that’s exactly what Jon was saying I have seen many many papers
That claim or that suggest to report GDP per worker or GDP per hour work work okay that will be a different measure that or measure which is per adult or per working age adult so for instance sag as was saying I go to many conferences where they tell me oh Jesus
You know you complain a lot that the Spain is only 50% the level of income per capita than the us but look how many vacations you take in Spain look how you know few hours you actually work in a particular year what about the informal economy in Spain is it actually that’s a
Little bit of a myth so the informal economy of Spain is already 20 22% in the US is around 17 16% so you are really only talking about like a four five% difference and what about the informal economy as you get older so that’s what you’re yeah so I
Don’t think that that will matter that much because I think that as you get older most people will are probably moving into home production so my dad goes and you know takes my my nephews to school and takes them back that’s not part of the measure GDP anyway and I
Think that a lot of the informal economies actually relatively young people who do not feel they need to get into any type of formal Arrangements because they don’t need to have you know much participation in the work state I want to object to the idea that there’s
A right number and a wrong number yeah there’s a right number for each question and if the question is the productivity of the workers then you want output per hour if the question is overall level of the economy and you’re thinking about disincentives to work then you got the
Right if the question is how many aircraft carriers can we afford device then just GDP is exactly and that’s that slide okay so I’m coming back to that slide I promise to stop giving no no it’s okay it’s okay no no I love all those questions believe me I haven’t
Thinking about this for ages myself so I I I love all these questions and remember when I W when I went back to the very first slide I didn’t say that it was a completely useless indicator I only say it was a increasingly misleading indicator so if I’m I’m never
Going to be appointed the governor of the bank of Japan obviously just speak to begin with because I don’t speak a word of Japanese but if I were the governor of the bank of Japan and I go to the average conference in macro and I have 10 economies giving me grief
Because we haven’t been doing it very well I will say look given the my working age population Evolution what else could I have done I have done what I was supposed to do maybe you know 1% up 1% down but this is not that I have fundamentally miss anything
Now why I don’t think from my perspective that if I want to think about the big picture of how well economies are doing GDP per worker or per our work is the most useful of the indicators and again I give you the point it can be use for in some cases
There’s a minor Point data in hours is awful so you know if you are trying to do something with hours you know for the US they more or less make sense I can’t tell you for European Union countries they don’t make any sense they they are completely invented by some statistician
In the National statistical office the bigger point is that exactly as you was saying the number of workers and hours work are endogenous to labor market policies they are endogenous to taxes they are endogenous to a lot of things okay so Spaniard take six weeks of vacations on average is this the same
Decision that they will make under different situations maybe maybe not I don’t know I will need a model to think about that but there is something that you want to keep in in mind which is imagine that you have a restrictive labor regulation or very high taxes
There is immigration I’m going to come back to that in a second but remember we are not counting citizens or Nationals we are counting people in the country okay and National stat statistical agencies have a fair assessment of how many people are in the country regardless of their legal immigration
Status but immigration is sensitive to policy it’s in yes yes yes exactly we we are going to talk about that migration also as an indous decision okay but the point is that if you are going to have some type of Labor regulation that’s going to expel from the market most likely those
Who are the least productive so by a pure composition effect the average productivity is going to look much higher so the most cited person in my department is Frank deol Frank deol has more citations than I do so if tomorrow the de files me the average citation
Count of pen economics goes up pen may look better on some rankings now it’s a good idea from that that I should be fired maybe but you know there is a composition effect you need to be aware of okay and taxes and labor market regulations have a huge effect on that
So just telling me look France is doing okay because they are just working fewer hours maybe maybe not it’s a little bit more of a subtle point you have a question okay this is a really important point right yeah we have some labor economists around the
Table is this it sort of rings true anecdotally that um low wage workers can work in the US and they kind of sit out of France and do nothing and and people keep telling us how great their productivity is look my my favorite example when people asked me this
Question was 1996 so I was telling you that I got into the I became a working age adult in the United States in 1996 when I moved to the United States so we’ve moved in the European Direction yeah we are moving more and more yeah we pushed out more of our least productive
Least educated absolutely but let me let me tell you this anecdote anyway so you know I rent an apartment and I need some basic Furniture so I get a car and I drive to the Mall of America I don’t know if anyone of you have live in
Minneapolis and I buy like some glasses and some dishes and I get out of the parking lot and I see that I need to give my parking ticket to a person and I was like wow I haven’t seen this in 20 years in Spain why because Spain is a leading Pro
Country in the terms of adoption of Technology no it’s just that because of Labor Market regulations see 1985 it made sense to install a parking an automatic parking machine to pay your ticket while in the US it still was more profitable to have a teenager taking your ticket okay so all these decisions
Are endogenous the way you organize another thing no one buxs your good luck trying to go to a supermarket in Europe even the most fancier super expensive supermarket in Europe no one is going to BU your groceries for you in the US at least at Whole Food whats they still do
Well that’s just relative prices is scoter for society I don’t know I need a model to think through it but those are optimal responses to relative prices it’s a matter of questions the statistics most appropriate depends on the question exactly if you push this argument if I look at the GDP level and
Growth of countries that are very string in labor market regulations where there is a correlation right there so if you push this argument through GDP is not EX level of growth yes exactly so I wouldn’t take it as an argument for not focusing on GDP per war no no no again
This is not an argument not to look at it I’m just trying to say that looking at perw working age adult is a very useful statistic to do that just let me put it in that way okay now you’re asking me a lot of questions for instance about policy implications
Migration we don’t have much to say about migration per as I was saying before we are looking at people in the country regardless of their citizenship or legal status so if someone comes from Mexico to the US it goes down in Mexico goes up in the
US and H interestingly in the data there is no correlation a very low correlation between immigration and output growth per working adult okay and again this is not in favor or against immigration it’s just saying that countries that have a lot of immigrants in the data are not
Going to do particularly well in our measure of perw working adult which you know again I think is something that is interesting to know and of course coming back to the point immigration is a is a decision I mean the US changed dramatically since 1965 when immigration
Regulations were e okay H you know the us could change regulations again and then of course the same with fertility now I’m going to come back to fertility a little bit later of course fertility is to some some extent endogenous the only thing I want to mention now is that fertility has very
Very long lags okay so just think about it in this way imagine that so fertility rate in the US in 2023 was 1.62 imagine that we get some type of consensus that this is below to low and we decide to do something about it well even if Congress passes legislation this
Morning it will take nine months until something happens and after that new birth happens it will take 15 years until that kid enters into the working age population and it will probably take 22 23 years until that kid gets out of college and gets a job so fertility anything that you want
To think about fertility is super interesting and we can talk about it just keep in mind it has 20 25 years LS okay so if you are going to ask me what if Japan had done something a slightly different in fertility in 2000 my quick
Answer is it will have next to no impact in my data up to 2019 not to mention even apart from the lags uh China and a lot of other countries are figuring out that government policies aren’t helping with fertility yeah I I can I have a few
Slides at the end if I I I put a lot of extra slides in case that people have questions and yes I have over there assessment about how useful so the the empirical evidence I have in looking at it is that if you are super aggressive in terms of given um incentives to
Fertility you can go like some European countries have been able to go from like 1.4 to 1.8 so you can get like around 04 increases you don’t go back to 2.1 okay ER now I’m going to try to argue later that even going from 1.4 to
1.8 has a huge huge impact in the long run you know what what is this going to happen in China or South Korea I’m going to show you some numbers about South Korea later it’s also met policy levels in ital in southern countries in Europe as you know there’s a lot of discussions
About financial incentives but Italy and Spain are among the countries that the lowest density I mean geographical distributions K perk child care in general and until you get to middle school I mean the spal concentrations of schools in Italy is the same of Northern African countries once it that you cut
The kid out what are you going to do with it no no I I understand and and again this is I’m not I haven’t prepared a lot of a slides about the review of the literature when we get to that if you want I can tell you a little bit
What we believe we know and what we don’t know I’m just saying that to the best of my understanding the best summary of the literature that I can give you is that the very aggressive in anything that we can put on the table to incentivize people to have more kids
This is is going to increase fertility rates 04.5 which is non trivial it’s non trivial at all but no we are not going back to three that we don’t seem to have discovered any way to do that maybe there is some secret lever that we don’t
Know now as I was mentioning before on the continuing usefulness of GDP and GDP per capita so John actually Ed a great example we are worried about how many aircraft carriers we can deploy against our friends in Beijing that depends how big is your GDP okay uh a little bit less
Dramatic sustainability of public debt okay the problem with public debt is that it’s a you want to think about it as terms of GDP so if Japan population is going down even if they are doing okay in per cap in per adult term that’s a real problem for public de also GDP
Per capita for instance is still extremely useful if you want to think about some measure of how much stuff we have per person in society you know how many goodies we have to distribute among us so we are not saying don’t look at GDP per capita anymore I’m just saying
When you are thinking about you know how is the business cycle doing in the US think more about in terms of per worker or per working age adult and also we don’t have anything to say about issues like you know it’s a good idea to have larer smaller population it’s not
Because pit and chat are here it’s really one of the most beautiful papers I have seen in 2023 they have a fantastic paper on the importance of considering the total population okay so all of those I fully agree with you guys I’m just as J was saying one question one
Measurement okay so in the rest of the presentation I’m going to do the following I’m going to first try to document that this holds for a lot of countries so we are saying Japan I want to convince you that this happens for everyone in the world or at least for advanced economies
Then I want to think about the data through the lenses of the neoclassical growth model I’m going to say let me have a neoc classical growth model and I’m going to have I’m going to fit exogenously ER population growth and see what happens and you know that will help
Us to understand a little bit better what is going on then I’m going to talk a little bit about some extensions and then I’m going to talk about China and India I will probably not have a lot of time but depending on time and you know
If any one wants to stay around I have some final thoughts on the demographic future of humanity by looking at numbers because really the demographic future of humanity has really changed dramatically over the last 10 years what has happened with fertility has been quite amazing
And if you uh have maybe I can give you some fun examples about how wrong you can get it when you forecast demographics so maybe 20 years from now people will be make making fun of me about you know remember that be a the dud I me he got absolutely everything
Wrong so anyway data so we are going to look at the world Banks World development indicator database I have written a few papers on growth and I did not have a good experience with the penw world tables I was looking at them and for countries that I know a little bit better the
Numbers just didn’t make any sense and you know I was looking in the in the literature and I discovered there is a nice paper by K kovski and chabi s Martin where he actually makes a similar point we are going to look at G7 point that the world table has a lot of
Creative Accounting that as so for instance they do a lot of very aggressive transformations in terms of PPP adjustments and then you get numbers that do not make any sense so for instance they assume once you have done PPP adjustments they claim that Spain grew 15% in 20
2004 no Spain did not grow 15% in 2004 it has been around for a while but I think that it’s getting worse because they really try to make these things coverage more more and more countries and H so when Chinese we spend we have another paper I have another paper with
W and with Leo henan where we are thinking about similar issues but just focus on China and we spend some time looking at the China number and the pen World T Numbers just do not make a lot of sense so in the wdi are you avoiding PPP adjustments and just looking at yes
Because we are going to look at GDP in National constant prices that’s that’s the key yeah but they are going to have also the good thing about the world data the World Bank data is that they have a lot of breakdown of information on population and things like that so I can
Put I mean I guess I could always get GDP from pen World table and population from the World Bank but then you’re kind of mixing things and punos but avoiding PPP is not a good thing is it it’s a bad thing we we’d like better PPP things but
Ignoring PPP is apples and oranges right no I fair enough how bad you think those adjustments are they’re pretty like better adjustments you want own country growth you want it in local currency and and if you’re comparing it to growth in the US then it’s no no I I understand
But I’m since I’m going to look at G7 plus Spain I don’t think that the relative changes in PPP induced by now if we were doing us with then yes you are 100% sure right that this will not make a lot of sense I don’t think that these PPP adjustments
Are going to change my view of the world that much I have looked at the PPP adjustments of the penb table I just don’t believe that I think that they introduce so much noise that you know this is the least of two bad choices and it’s because they’re trying to cover
These countries that range over a factor of 50 in terms of levels of development if they were just trying to compare Spain and the US they will probably do something yeah but I I am telling you the day I gave up on the pen wall tables
Is when they told me that we grew 14% in 2004 now we didn’t not I mean I will have notice okay it’s not it’s not only me like the the Eon The Economist community in Spain will have notice we were growing at a 14% well I don’t want yeah it’s okay go
Ahead we’ll talk about this later okay anyway so why G7 plus Spain well I want to make the point that this matters for all rich economies Spain is the next economy after the G7 in terms of science I’m on the rich Economist and I know it
Well so kind of gives me a kind of a reality check that the numbers I’m getting makes sense uh I don’t know if anyone knows but actually my very first job was to do Spanish NEPA so that’s the only thing I know about everything else
I don’t know anything anyway H and as I was mentioning before the population the working age population is between 15 and 64 okay so these are the basic facts so let me show you from 1990 to 2019 we have done this with many different samples uh many different H beginnings
And ends but let me tell you why I think this 1990 to 2019 kind of makes sense because it’s basically say starting around 1990 that these big divergences in the evolution of the population the working age population over total population start to be significant okay Japan the big drop of
Infertility in Japan starts in the late 1960s 1970s and it’s by the early 1990s where this starts to be significant in the numbers why we stop in 2019 because at the end of the data set so you can see the first row I know that people in
The in the in Zoom cannot follow this so just look at the at the first row GDP H you see you know Canada has doing pretty well France know so well Germany know so well Italy that’s terrible by the way before you say anything Elena I no
Matter how you adjust Italy Italy is always awful okay so Italy is orthogonal to adjustments how come s is so much better uh you know we are more productive anyway Japan 93 Spain 206 UK and the US and then sometimes you know if you pick your standard textbook in
Macro a lot of times the numbers are reported in per capita and when you see numbers in per capita they start to get a little bit closer to WEA okay so you start see for instance the US goes from 2 49 to 152 why because H population has
Been growing a lot 0 95 if during that time kind of a rule of Thum now things have changed a little bit but between 1990 to 2019 rule of th is that half of the growth in the US was people born in the US the other half were immigrants
Like me H but in Japan you already see that the growth of the population was very very small so in terms of GDP per capita they don’t change that much you go to only 0 84% now the one to third the fourth row is GDP per working age adult and that’s
Precisely the point that motivates this paper now what you see is a much a smaller range of variation the US is still doing very well 156 but now it’s actually doing a little bit worse than Germany that is the best performer 158 DK 152 Japan 144 I would say that roughly
All these countries are doing pretty much the same okay and yes there is the point of levels which I’m going to come back in just one second and then you have Canada and France doing a little bit worse and then Italy doing substantially worse so let me show you
In a graph hopefully there are not too many lines I try to squeeze this as best as I could yesterday I was spending some time with the with with latch but first row First Column in that panel you see the GDP index normaliz in 990 and
You see the big fun out that comes from the first line of very different diff very big differences in a growth in total GDP and at the top you will have the US of course wi the best the us no more than has more than double is GDP
Total GDP since 1990 at the bottom you have it and Japan but now you go down in the First Column you see the population index and you see two very very big performers out there Canada and the US basically Canada and the US brought a lot of immigrants they still had
Relatively High IM fertility then you have Spain Spain fertility was terrible but we decided that we like argentinians so we brought two or three million argentinians and two or three million people from Peru ETA ET so we grew a lot and then you have at the bottom
Countries like Japan that had very low fertility and had a very restrictive migration policy so when you do it in that way you see now F top row second column in that panel GDP over population it gets much closer together than before but the really interesting thing
For me is when I look at the population over 15 to from 15 to 64 which this is the second row second uh column and over there you very clearly see what is happening with the US and you very clearly see what is happening with Japan
So Japan remember what I was telling you before they have 15% less people between 55 15 and 64 now that in 1990 the US has 30% more by the way you can see very clearly how the US is already leveling off okay as the fertility has been going
Down in the US and then that gives you the top row right panel where I pretty much see all the countries growing in parallel you know small differences except for the case of Italy okay so of the G7 plus Spain seven countries more or less do
The same in terms of H per working adult and then Italy which is the big outlier out here now there’s also an interesting inflection in the top two panels right to Middle after the great Rec yes exactly so we are in one of the extensions that we are going to do we
Are going to think about before and after the Great Recession and we are going to investigate what happens if we are thinking about this either as Chang in Trends or a big drop in the level of GDP a huge and your feelings this well uh I’m just trying to understand the
Data at a very fundamental level I can show you that graph later on but yes basically if you think at this moment to me at least the best way to think about the US is we were growing at the balance growth path in 2007 something happened
And we have been growing at the same level but with a 5% lower GDP so 5% of GDP disappear forever and you know that’s Milton Freedman I guess that here at hu I can you know remember him he was right that you know recession is you lose 5% forever which in welfare terms
Is gigantic yeah if the kind of questions you’re asking might be also fun if possible to do some something like a skills weighted or education weighted population in a sense you’re saying well we we’re gonna we’re going to give you a break on the fact that
Most of your people just sit at home and take because that’s labor market policy but you also might want to take as a slower moving thing fertility uh castres of Education I don’t know if you can get it yeah so I try for something I did
With Leo henan a few years ago that we presented over here actually at at Huber we try to have some measures of human capital so Robert Barrow and Lee have a very nice data set the problem of those data sets is that for instance they count how many hours of college how many
Years of college do you have so they are basically implicitly saying that a mejor in something that has the wor studies on it has the same value in terms of GDP that I mejor in economics why not use Pisa yeah okay the problem with pizza
Is that we will need to have a mapping between your scores in Pisa and how productive you are and that I don’t think anyone has it I think you could okay maybe I could do that yeah it might or might not make conceptually it’s it’s a another on the list of questions it’s
Not exactly the same question but it’s a yeah so the the point we were trying to make over there in that paper with Lee is that if you think the US has not been doing much better in education that 30 years ago but at least as measure as the
Percentage of population with a college degree countries like Spain and Italy have dramatically increased the number of students of workers with a college degree over the last 30 years so if you Som how control for that then our economic performance is way worse who knows what they learned in those
Colleges that that’s the point I was trying to say not change that much I think you I think you’d find it different if you work with the pie of data yeah okay let me let me look at the P data that’s something is like age uh you know just raw things like high
School or college yeah I can I can try to do something like that people are immigrants who don’t speak your language that’s a measure of of sort of the skills you’re working with no I can tell you for instance that there is like all this um sets I don’t remember now if
It’s in Pisa or it’s in some other survey but they actually show that the average college graduate in Spain and in Italy have the same cognitive abilities that a high school graduate in Sweden um which you know having gone to a college in Spain I can tell you is not a
Surprise anyway I can tell you stories about college education in Europe for hours anyway we do the same also starting in 1980 now the point I’m only doing that by the way I cannot really go before 1980 because before 1980 I don’t have comparable data the only point I
Want to do with this thing is that you know just to convince you that we try many different combinations of a start and ending and of course the big difference that you are going to see over there is that you are in some sense mixing two parts of the data 1980 to
1990 where working age population was still growing everywhere with after 1990 where this thing starts to matter is the bottom R the beginning year or the end year H is the average a lot of your story though should be the change in that bottom row for exctly so this okay this oops sorry
I wanted to do the the okay this okay so this is Japan and they started over there at s and they are going down down sorry John I should have pointed in the other direction it’s going down down to 0 56 so 70% of Japanese were between 15
And 64 in 1990 now is only uh 54% of them that’s amazing thing look however other countries it has been much more of an stable thing but it’s starting into happening okay so later on what I want to convince you is that Japan is just 10 15 years ahead of the rest of
Us okay and that’s the point that’s that’s why I think this paper is important and everything you think has happened to Japan is going to happen to the rest of us is that good or bad H is good for to make value judgments no I mean okay I I
Actually one of the reasons I I went for dinner with with Chad when he came to pen to present his paper and and I told you that I have been thinking a lot about the philosophy and the and the and the there is a there is a branch of
Philosophy about the ethics of population size because it’s a non-trivial problem how you evaluate walls where the endogenous choice of policy changes the number of people okay and so in that sense if you want when we finish I’m more than happy to tell you about that uh but let me not
Derail but I have I have spent a lot of time believe me reading about the philosophy of population you have that working age population there’s a difference between old people and children yes children are are good things right yes well your little story yes make are you combining bad things and good things
Together old people are bad things yeah hang on I but remember I’m only looking at 15 to 64 because the point I’m trying to make is Imagine let me let me try to see if I can make this point imagine I’m the president of a country I’m a president
And I’m trying to figure it out you know how much we can produce in this country and I’m going to constrain myself of I’m not going to get people less than 15 to work because I’m not such a nasty guy and I’m not really going to get all
People to work either that’s the idea of social and I want to have a measure of given how many people I have between 15 and 64 how well I’m doing that’s what I’m looking at so I’m projecting into the future yes so it matters if it’s if
They’re in the younger part of the distribution versus yes no no no no no exactly that but this matters with respect to the future I fully agree with that and I’m I’m going to come back to that in just one slide okay so I’m not claiming that any of those statements is
Not important I’m just trying to call people’s attention to how important this is and then you can say look maybe I can move over here maybe we can if I convince the profession that this is important this will motivate us to write much more sophisticated models maybe I
Can have a model with o g structure maybe I can have a model with endogenous growth endogenous fertility endogenous migration all that this is just to say hey this is a this is such a firstorder problem that the fact that we are not paying more attention to that is a B for
And get simpler models because we’re all you found that we’re all the same in one important thing and yes we’re different from each other and how many hours we choose to work so that’s you’ve simplified it not complicated but if you want to start speculating about the
Future yeah you need to add Africa because the place we’re all on the same demographic path except subsaharan Africa which on a totally I actually disagree with that so I have a few slides you may need to leave so if you forgive me if I jump ahead for a second
And I do a nonlinear presentation I have another paper just sent it out to the journal two weeks ago so if you are the referee fantastic paper it’s called we actually have data on the demographic transitions of 182 countries and we document in that paper that every country in the world
Including every single country in Africa has already started the demographic transition they just have they just have an existing bulge it’s going to be no no I understand no no but the point we make over there is that the demographic transitions are getting faster and faster but at an amazing speed okay so
The metropolitan area of Nairobi is already below replacement rate Africa they’re going to have a lot of countries below replacement rate in 10 years now you are absolutely right there is something in demographics this is called momentum yes which is it’s going to take 20 30 years to be felt okay
But what I’m telling you about what is happening with Italy and Spain this is going to be the future of Africa as well in 2016 and by the way Brazil is going to start losing population around the year 2030 so what is happening today with Japan is the Brazil of 2030 that’s
Amazing and that’s something I you may know it but I don’t really think even I’m talking with a lot of my Brazilian co-authors they don’t seem to be fully aware of that are you going to explain or get to the causes of population decline in your discussion if you at the
End I have some slides on the on the demographic future of the of the of the of are you going to get into the difference I’m sorry are you gonna get to the education of women as being a causal Factor that’s where I wanted to get to
So part of the answer is yes it seems to matter but what is really amazing are two obervations first is the enormous collapse of fertility since around 2014 yeah but that’s what I’m getting at is that the cause of the enormous itility a dominant cause I don’t think
It’s the do I mean I think that changes in the education of women explain why we went from four children to 1.7 okay I don’t think they explain why over the last 10 years we have gone from 1.7 to one well Korea is at 0.7 0.7 the US is at 1.62
Well I understand but Korea wasn’t at 0.7 40 years ago exactly and that’s and now they’re women are all educated lots of things changed yes over the last no no but that’s the point the point CR sectionally well educated women in the 1930s had lots of kids so but that’s the
Interesting that’s the interesting thing so for the first time in the US there’s a very nice paper by Matias D about this for the first time in the US over the last five years or so the fertility the relation between education income and fertility has started to be upward
Sloping and this is very C you go to the suburbs to the rich suburbs you still see a lot of families with two or three kids you go to the inner cities they have one kid for the first time since we have data in the US starting in 2021 africanamerican F fertility woman
Fertility is below Whit fertility and they are lower educated so that is changing and it’s changing in a very dramatic way and that’s what I don’t think that education is really helping you to understand what is happening in the last six years education is also endogenous
The no no no I understand there is I’m just saying I really don’t understand what is happening with fertility you know I sorry if you brought me here and you know my answer is I don’t know but what is happening with fertility over the last 10 years there’s a huge
Literature on that not in economics okay it’s outside of econ ecomics and that’s why you’re not paying it all it and hisus authoritatively is telling you they don’t know either so I’m member of the population got you know coration no here but no but I but I I
Just wanted to mention I’m a member of the population studies Center at pen which I think is one of the top demographic groups in the US and I go to all their seminars on Monday and you know the director is a big is a good
Body of mine because he’s AR Ian so we can go for drinks and I have asked him many times ailio what is going on guy tell me I don’t know he’s the super duper professor of demographics so that at least to me is a first pass that this
Doesn’t seem to be I don’t think I’m missing like the big paper in the Jal population studies were kind of clarifies on you should watch the time and tell tell us to shut up when okay don’t worry no I like you know I like to talk anyway so what I’m going to do
Today is I’m going to have kind of a minimalistic growth model and I know how to go very complicated and I have gone very complicated in a lot of other papers but as Jon was trying to say before I just want to convince you that even the simplest possible neoc
Classical growth model gets a lot of things right so what I’m going to have over there so I’m going to have an economy that is populated with an infinitely Lea representative household of varing size and I’m going to take that is given okay so NT is going to be exogenously given
The preferen is very simple discounted utility no shocks over here everything is perfect for Sight and the functional form I have over there is log over CT over NT which is H per capita consumption we have played with different formulations of the utility function doesn’t really seem to matter
Much for what I want to tell you today okay I want to be very careful output standard c glass production function you have Labor augmented technology you have a low of motion for Capital with depreciation Factor rate Delta resource constraint for the economy and then total population which is just the
Factor of the population growth period by period okay now this is an economy that has growth both in population or changes in the size of population and in terms of productivity so I need to write everything I need to rescale and I need to normalize the variables nothing very
Deep over there except what I want to show you is over there you are going to have an lowercase LT and that LT is going to be the ratio between the number of people between 15 to 64 and the total population and I’m taking labor Supply as exogenous over
Here okay and again I understand you could do labor Supply endogenous but just to make things as very simple as possible now the very good thing about this model is that everything is characterized by a standard equation and this is exactly the same a equation that in the neoc classical in
The textbook neoc classical growth model except that you have this LT over here okay so think about the first case case one lt+ one is a constant if this is a constant this basically means that population 15 64 over total population is a constant some economy that is in some type of steady
State in terms of population well it’s exactly the same model that the neoclassical growth model except that in front of the production function I have a constant and if you want to think about the Dynamics of the model it means that any type of shock like a shock to
Productivity a shock to the discount Factor Etc will have exactly the same Dynamics that in the neoc classical growth model now in the case two LT plus one is going to change and that’s what we are going to fit into the model when we compute it and this is equivalent to a technological
Shock okay so LT plus one changing is exactly the same that if we become more productive or less productive so if you know how the real business cycle model works you know how a model where the ratio of population working over total population behaves okay exactly the same
Dynamics I can just take exactly the same code so what I’m going to do is I’m going to calibrate the model and I’m going to do the following I’m going to pick a few parameters that are going to be constant for the eight economies I’m going to I always click the BR button
Yeah in the standard real business cycle model it’s a transitory toity shark which is important to generating this is like a permanent shark well so you can think about this in two ways one it will be permanent in fact if you read the original two papers by Kim pler and
Rello in the EUR of monetary economics where they kind of work through the whole thing in the second they have like two papers in the first paper is transitory in the second one they work out the Dynamics with permanent so this will be the RBC with a permanent shock
But also LT plus one you could imagine having a lot of persistence but then kind of reverting back or happening something so that’s in that sense is the what we are is that the model inherits the same persistence that you are feeding it into the population okay yeah sorry lagging
Behind but I’m thinking about cor I’m thinking about ASO I’m thinking about the debate on the labor share is it obvious that you want eight years lab menting um again the the point I was trying to do over here as I was mentioning before in the in the
Presentation of the model was not let me go and build a very you know state-ofthe-art Wells and whistles model this was a very Minnesota exercise let me take the neoc classical growth model and see what happens with you you could have an A times L an a * K yeah that’s
Fair enough that’s I’m happy to do it I’m happy to do I just want to know what happens with like the very in some sense this paper was for myself for Gustavo I guess we just wanted to figure it out what happens okay it’s nothing nothing deeper than
That anyway uh thankfully I’m not in a situation anymore where I I I need to you know be absolutely sure I publish every paper so if I cannot publish good I mean Gustav we have a different view now H so we are going to take three
Parameters and we are going to make them equal for all countries and then I’m going to have a different G for every country I’m going to have an exercise later when I use the same G for all countries and I will try to convince you why doing it in that way is useful
Anyway so this is what you get so the blue line is the model now you think that that blue line is a constant but it’s actually not it changes because you are feeding we are feeding the L Over N is just that from year to year the
Differences are not that big that you can really see a big change but if I had the zoom over here and I could zoom it you will see that that blue line has a little bit of a baring slope over time yes in 2008 shouldn’t the the L hat I no
It’s the working not the import exactly and by the way what I’m doing it is I’m normalizing the model and the data to one in 1990 which is just assuming there is a constant in the production function that makes them equal and to me the really interesting thing about this
Graph yes I know I always hit the Brom one that you know the model seems to do a quite well job now yes this is the 20 7 I told you before we are going to come back to that but it seems that a very simple Model A very simple neoclassical
Growth model that takes into account the time baring look for instance this is the case of Spain because in Spain we had such a gigantic immigration actually as the percentage of the population we have way more immigrants at the US you can see now that this is not a a a constant slope
You know for a lot of these countries you seem to do pretty well pretty well I mean you Chang the growth rate yes and I’m coming back I’m coming back to that Trends isn’t that remark no okay very good come back to that in a second so
Yeah when you back out the G the S residual you’re using employment the actual employment yes so that’s the success is that well because I’m not doing employment rate doesn’t matter that much yeah no that that’s fair enough we need to do something about
That we need to do yeah we need to think a little bit yeah no no I know I know no I counting how much was just the G and how much was the change in in the fractions yes I I can I can do that but think it actually looks better than I
Said exactly that the G really isn’t make so so maybe this help you what I’m going to do now is I’m going to take the G from the US and I’m going to assume the US has a labor market that more or less Works has a system that more or
Less works so you can think about the G in the US as a first order approximation to the growth of the world technological Frontier which I think you know a lot of people in in growth Theory do and this is what you see so for the US it’s
Exactly the same that before what you start to see is that some countries don’t do so well Canada Canada seems to be missing a lot so if I were Canadian I will not be very happy you know Germany is still doing okay France seems to be missing a little
Bit Italy Italy really really does a terrible job Japan you know Japan is still doing pretty well that’s the point we are trying to make once you think about you know this working age still it really really seems to be H the fact that you know the way you want to think about
Japan really changes now some of you were already asking you know what happens if you change Trends so we did this in two ways one is we changed the trend in 2007 and again we could think about a more sophisticated model a second I would to look at Japan I’m confused by the
Magnitude so it’s going from 1 in 1980 to 1.04 in 2016 because this is income per working age but only 4% increase in income per working age yeah you’re right not quite sure what I think we maybe maybe it’s the log yeah maybe it’s theog it’s the log
Okay yeah yeah but but we should clarify that actually gust write that down anyway so as I was saying before we are going to do an exercise where we change the trend and this is table is just to show you that the tends really seem to be very different after 2008 that before
2007 and this is what happens so we changed the trend a little bit for the us but we are still see to be missing things and for the case of Italy now Italy the trend is so full so you know they still do pretty bad but the other
Example that we do is the idea of Milton Freedman permanent drop and this is the Dynamics of the model where you have a permanent drop sorry what were doing the previous this is perent changing the trend so this is in the first exercise is changing the trend here is you just
Go down like yeah you change the interet we lose 5% of tfp because we just lose it okay and what is really interesting to me at least is that is that for the US it seems to do really really well I have a very simple model of the US economy that does this
It seems I’m capturing a bunch of things anyway so China and India is go back to the previous L uh do you have a quick hypothesis about why Italy is not function I I do the whole country is dysfunctional I mean I’ve been there off
And on for the last 101 15 years every year it’s worse more strikes more problems more toilets not going to clean up garbage everywhere I mean it’s just a completely dysfunctional country um and it’s gotten worse now I mean does that fit your sort of understanding uh yes
That’s personal observation yeah no I I think it does I have I have a paper with Veno quadrini and leenan also on Italy just came out in review of economic Dynamics and that’s basically the the point we are trying to make is that tfp is not growing in any way that you
Measure it which goes to to that point is just they are becoming growingly dysfunctional now the only thing that worries me is that the present of ital is the future of the US but that’s something we can talk about that later I don’t know I mean following up on
Arvin’s point I don’t know if it is true other country too but there is a spatial segregation countries like Italy where the North and the South are by all accounts different economies is it true other countries too okay no so what so what we document in the review of
Economic Dynamics paper we actually look at the big picture of Italy since the unification the really amazing thing is that there were many countries in Europe that had as big Regional differences as Italy in 1870 and they have shrink their differences while Italy has not been able to shrink those differences at all
There’s in way who cares about Italy but the us too I mean growth is an especially con but the but the Italy the the amazing thing about Italy is that Regional differences are growing more and more which maybe happen in the US as well but yeah what is the the
Interpretation of these figures I back out the G from or then I put it by hand the G from just solo residual Lo yes with actual employment yes and the model is I’m I’m feeding that in but keep but then also feeding Capital working Agee population instead of employment yes capitalist
Endogenous ah this is the the model line is what should have happened exactly and the red sorry sorry Sor there’s two there’s two things to take away one is the relationship between employment and working a population doesn’t do a lot and the other one Neal modulation exactly you feed in the G
Yeah sorry I should have made that a little bit clearer let me very quickly talk about China and India and then I’m running out of time but we can have some time for some questions or I can show you a couple of fun numbers so China and
India the interesting thing over here is that China you know GDP 9.6 GDP per capita 8.6 GDP per working adult 8.18 so it doesn’t really change our view about China that much why because the change in the working age population ratio in China between 1981 to 2019 was not that that dramatic now
India had a growing population and a younger population on average which meant that they go from 6.8 to 3.79 and what I think this highlights is how much more India has been underperforming with respect to what China has been able to accomplish and to me that’s also very striking now look at
The population over total population in the case of china it Peck over there and it’s falling and it’s falling on a tremendous speed which tells you that China is going to really have this l in China is going to really matter dramatically and that’s why I have this other paper with
Lee and with when on the neoc classical growth of China where we basically are saying any way you want to forecast what is going to happen in China over the next 50 years you need to take account of this and it’s already baking okay because even if Chinese start to you
Know follow the party orders and have babies like crazy tonight nothing is going to happen for 25 years the future of China is already baking okay so if you want I can answer more questions and if not I can I was thinking about can I just make one
Comment today by the way is National Hug and Economist day and I’m not sure that all of you know that okay yeah today January 31st is National Hug and Economist day I I need to warn you Stanford’s HR and sexual harassment policies probably makes this
So no it is it’s true it’s such a day look it up National Hug and Economist day so I anyway so you can go out written consent first well that’s a Stanford but let me let me give you I did the the the HR training for University of California
Five weeks ago one uh I don’t know what you guys do here in Stanford but it cannot be worse than that one no I’ve done both Stanford’s better yeah no no you yeah the UC the UC was was so realistic anyway so let me tell you a
Couple of things okay and as I was saying before mutato nominated the faula narat so changing the name this is a story about you the present of Japan is the future of the glove okay so all of you know what the total fertility rate is the Japan total fertility rate fell below
2.1 and you will see in a second why 2.1 is so important in 1974 right now it’s a it’s around 1.25 let me give you a few countries Iran 1.69 us 1.62 Brazil 1.42 45 China 1.0 South korea7 okay why does this matter so you have heard the 2.1 a lot of times
Probably but you may have not heard the reason why you get this 2.1 so basically 2.1 is the replacement rate okay the number of children you need to have to substain population levels forgetting about net migration and the reason we compute 2.1 is the following you have
One plus the sex ratio at Birth and you divide by the probability of a woman to survive to 30 now this should really be like the integral of survival probabilities weighted by H fertility by age that’s a little bit tricky so we just take 30 because it’s like in the
Middle of the fertility age so if you take the natural ratio in a natural population with any type of quote unquote outside intervention you have 1.05 boys born for every girl and in a country like the US the probability that a woman will get to 30 years old is
98 so you get 1 + 105 divide by 98 is 2.1 so the idea is if a woman has 2.1 children like 1.07 will be a boy 1.03 will be a woman of this 1.03 one will complete her fertility age and then she will have another 2.1 and this is a
State War well have you on ploted the age of marriage has grown from like 22 for women to 28 men’s like 24 to 30 and that’s still growing and so if PE women don’t have a first child till after 30 they usually don’t have a second I mean
So the crash is yeah but let me I’m just telling you I’m just telling you something age of first child we talked about education birth no no I know okay very important okay but let me let me let me tell you the following which perhaps you have not thought about it
The first one is that the two parameters I use which is the sex ratio and the fertility are actually not the same in the planet why first of all because there are many populations that practice selective abortions and the best example is China where you have around 115 boys
Per each 100 girls so think about it in this case you know if a in a high school class of 225 of 215 there is a sortage quote unquote of 15 wom or say six woman and in India is 110 and in addition to it the mortality
Rate in a lot of African countries whereas where kids are been born now is actually much lower so it can be the case in fact for most African countries the replacement rate is not really 2.1 it’s 2.6 so what we compute in another paper is that the world replacement rate in
2023 is around 2.25 okay so it’s not 2.1 it’s 2.25 and this matters and why it matters because according to the United Nations world population Prospect 2022 the world total fertility rate in 2023 was 2.3 actually that’s not the case because they are hugely overestimating birs for instance they forecasted 10.6 million
Birs for China China only had n million birs and those are the ones that the party wants to tell us the reality is probably around eight and I have done this I spent like two days of my life like going country by country and going to the National statistical agencies
They are over reporting and I if you want later I can tell you why the United Nations is over reporting there is there is a very nice agency principal agent problem of what they are doing over there so the total fertility rate of the planet right now is around
2.1 2.2 perhaps and replacement rate is 0 25 so most likely the planet is already below replacement rate and this is only going to continue happening so the world population is still growing because of the momentum effect that I was telling John before of of larger cohorts and increases in life
Expectancy but also most countries are on declining fertility paths pretty much everyone yeah so there worse than way you just yes no no exactly because what I’m saying is we already fall below replacement rate and we are going to continue falling down right okay but the
Fact that we for the first time think about it this way we are the first humans in the last 100,000 years that belong to a generation where we are not replicating ourselves there have been many non-replication but it was due to Deaths not to lack of births yeah but even in
Terms of deaths the thing is there was kind of a low FL numbers at the planet level at the planet level yes okay so yes China has you know like the big Civil War and 50 million Chinese died terrible for human tragedy but you know people in Brazil are still having a lot
Of kids 1340 wasn’t that great in Spain but even if you look at the World level even during World War II and World War I World population was still incre ining now this is the birth rate and the death rate and you very clearly see how
Quickly this is going doing a little bit of eyeball we are going to probably cross around 255 okay so what I estimate is that according to the latest numbers I have we will pick at around 9.7 billion around 2055 now the numbers I’m seeing for 2023 and 2022 is that fertility is falling
Faster than my forecast so 2025 maybe an overestimate now the United Nations is estimating 2086 and 1043 billion that’s the peak and then according to the United Nations we will go down why is different first of all because the United Nations is assuming much higher birth rates than what we are actually
Observing in the data and second because they assuming recovery of fertility now is fertility going to recover who knows that’s my point before that maybe in 20 years you will be laughing about vies stupid forecast about the worldall but I yes don’t see anything in the data that suggest that
Fertility is going to recover why do they say fertility is going to recover okay do they give a reason or did they just say we think it’s going to no to the best of my understanding they just don’t want to continue having forecast where it goes down it’s down
It’s down it’s down they basically want to do something that does like this they are they still defining a A Narrative of we need to control population I think remember I was talking about a little bit of a principal agent problem yeah so as soon as we get them to say the crisis
Is the crash of population then they’ll be they’ll be understanding yes exactly and we always have to make the narrative into a crisis exactly but that’s why they don’t want to make those adjustments so quickly because I think they are worried that we may shut down the agency the population agency well
The air will be cleaner because there’s fewer people polluting yeah well the air is getting cleaner anyway so but yes I calculated what would happen to Korea at the current rate in 100 Years it’ll be 18 million down from 4 okay so this is one of my favorite things that I
Have ever done oh yeah the rule of 85 there it is okay so this is something I proposed in a paper it’s kind of a fun thing to do and the the good thing about this is you can compute it in your head so life expectancy around in countries
Like Spain or Japan where for whatever the reason we don’t like to die is 85 years okay so if you want to know what the long run population imply by today births are assuming we can keep the number of births constant which you know coming back to your point is a big
Assumption is just how many people will how many birds today I’m 85 and that’s so easy I can explain explain this to the undergrass and they see the point so South Korea had 2000 230,000 births in 2023 you multiply by 85 you have a population of 19 million right now they are 51.6
Yeah and that’s assuming that the number of birs is not going to go down which it will go down even yes because the new cohort of woman is much smaller because you have when you have less women you have less births exactly yeah yeah no but this is this is the
Even in the amazing case that South Korea is able to stabilize the number of birs at 2030 a year th thousand a year they are bound to have a decline of 51.6 to to 18 million so how about North Korea okay I actually was very interested in that I
Spend a little bit of time searching for numbers and no one seems to have very good numbers about real birs infertility uh fertility in north but yes because I was worried you know the problem basically with South Korea is that they are not going to have soldiers in the
Army I mean North Koreans are just going to walk in and you know very so they’ll be still exactly no but the the point is I if you look at countries like Taiwan which is in a similar situation Taiwan is just not going to have soldiers for there it’s
Just not fine yeah no but China is so big that even if you still have you know half of the population you still have a lot you know when mun they told him about a nuclear war and they said half of Chinese will die and say well we still have another 500
Million so that’s a little bit the perspective of these guys you wrap up yeah of course anyway uh the only thing I want you to tell then to convince is population changes matter a lot in the way you want to think about growth this is not a paper about Japan it’s just
That Japan has been 10 years ahead of the rest of us I can ask what about life expectancy I’m not thinking about the 90 or old Italians who can be 120 year old soon but there are Eastern Europe there are lots of countries where relatively young population type of countries where life
Expectancy is not very very high well but are you thinking about what will happen if life expectancy grows a lot or sufficiently so that on balance in the working age range but remember that the most so what happens in countries that have lower life expectance is not that
People die when they are 40 and 50s that they die when they 68 70 but I’m thinking about Eastern European countries they die in their 40s not that much anymore that was that was in the 1990s after the fall of Communism and stuff like that the the big differen is
So if you compare the US so why does the US live five years less on average than Japan or Spain because a lot of us people kill each other when they are teenagers and because the US has a lot of traffic accidents and see recently it’s true that there are like mova there
Are a number of countries yeah but is I’m taking over organizer since had to leave and yeah yeah sure I’m happy I’m happy it’s okay no but but the point I’m trying to make here is even if mava mavia or Romania is able to go from 75 to
85 this just not a first order are rebelling women are just revolting against having [Applause] kids