Ratio Working Paper No. 391: From Demographic Dividend to Demographic Drag: Fertility Decline and Long-Run Economic Performance

Declining fertility is reshaping the demographic outlook of advanced economies, yet its long-run macroeconomic consequences remain poorly understood. Using a dynamic microsimulation model calibrated to the Swedish economy, this paper examines how alternative fertility and migration scenarios affect population dynamics, dependency ratios, GDP, GDP per capita, and economic growth between 2025 and 2100. We find that lower fertility initially raises GDP per capita through a temporary demographic dividend, but these gains are eventually offset by population ageing, a shrinking labour force, and slower economic growth. Under current fertility rates, GDP in 2100 is projected to be around 13 percent lower than under a stable demographic scenario, while lower fertility combined with lower migration reduces GDP to less than half that level. The findings highlight the importance of demographic structure for long-run economic prosperity and sustainable public finances.

Hansson, Å., & Lundberg, K. (2026). From Demographic Dividend to Demographic Drag: Fertility Decline and Long-Run Economic Performance (Ratio Working Paper No. 391).