Does Lower Fertility = Lower Interest Rates?

Economists have been puzzled by the persistence of low interest rates. Several years ago, Ben Bernanke talked about a “global savings glut” as one possible reason. Kenneth Rogoff recently discussed some of the competing theories which includes factors such as emerging economies and increased long-term uncertainty.

I want to advance one heretical idea: Are long-term interest rates being held down by lower fertility rates? Mark Perry highlights the dramatic plunge in global fertility rates. In the last 50 years, women have shifted to having half the number of children they used to.

How does this affect interest rates? For most of human history, your retirement plan was your kids. Having a lot of children and raising them was your savings account. With modernity, people are trading in their metaphorical savings account for real ones.

This is just a speculative question on my part, but I wonder if these two phenomena are related.

Posted by on May 16th, 2013 at 7:58 am

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