Jesús Fernández-Villaverde

👋 New to this feed?

Here’s an introductory post to help you navigate what I share.

🧵 If a post is in English, it likely concerns economics. My main areas of interest (not necessarily those where I publish the most) include:

1️⃣ Demographics & Population Economics.

Quick overview here ⤵️

x.com/JesusFerna7026…

2️⃣ Computational Economics.

Especially at the intersection of economics, machine learning, and high-performance computing. Nowadays, 75% of my research uses machine learning.

Examples here:

x.com/JesusFerna7026…

and

x.com/JesusFerna7026…

💶 I also post (less frequently) on monetary policy and economic history.

🔓 I believe firmly in open science—sharing slides, papers, and teaching materials to foster honest, rational debate.

All my papers:

📄 sas.upenn.edu/~jesusfv/resea…

All my slides and teaching materials:

📚 sas.upenn.edu/~jesusfv/teach…

I teach macroeconomics, time series econometrics, computational economics, machine learning for economists, and economic history (in various versions). I have also taught (less often) history of economic thought and philosophy of economics.

🇪🇸 If a post is in Spanish, it likely addresses economic policy in Spain. Non-Spaniards might find this of less interest.

📘 I recently co-authored a book with @frdelatorre, La factura del cupo catalán, where we critique proposals to alter Spain’s regional finance system. Many recent posts revolve around this debate.

⚠️ Other recurring topics:

— Spain’s social security crisis.

— Extensive (vs. intensive) growth and its fragility.

— Intergenerational inequality in wages and wealth.

— Political economy and institutional design.

— Systemic corruption in major Spanish political parties.

I am a coauthor and good friend of @lugaricano and @frdelatorre. The correlation between my views and theirs is 0.7. So if you follow their feeds, you might find similar ideas. In particular, I share most of @lugaricano's views on Europe and most of @frdelatorre's views on the Spanish economy.

🏛️ I am the Howard Marks Presidential Professor of Economics at the University of Pennsylvania, where I direct the Penn Initiative for the Study of Markets and co-direct the Business, Economic, and Financial History Project.

I also serve (among other roles) as:

— John H. Makin Visiting Scholar at AEI.

— Non-resident Fellow at the Civitas Institute (UT Austin).

— Member of NBER and CEPR.

🛡️ Disclaimer: These opinions are my own and do not represent the views of any institution with which I am or have ever been affiliated.

¡Vuelvo a Madrid el 3 de diciembre!

A las 18:30 h daré la conferencia «La economía española ante una nueva legislatura: ¿Una última oportunidad?» en el aula Valentín Díez Morodo, María de Molina 11, IE School of Politics, Economics and Global Affairs.

La página web para registrarse:

ieconnects.ie.edu/w/_/_/events/a…

La charla la había acordado antes de la convocatoria de las elecciones generales. Pero la fortuna ha decidido que sea solo cuatro días después de las elecciones, cuando probablemente tendremos una idea bastante clara de quién podrá formar gobierno.

Mi visión sobre la economía española es negativa. Los últimos años de expansión han sido, en buena medida, un espejismo. El crecimiento del PIB agregado ha descansado en gran medida en el aumento de la población debido a la inmigración, mientras que el crecimiento de la renta per cápita ha sido mucho menos satisfactorio.

Y, sobre todo, ninguno de nuestros grandes problemas estructurales (baja fecundidad, estancamiento de la productividad, sostenibilidad de las cuentas públicas y muchos otros) se ha abordado seriamente.

Desde aproximadamente 2012, los gobiernos de uno y otro signo han seguido la estrategia del patadón hacia adelante, amparados en los bajos tipos de interés reales a los que se podían financiar las administraciones públicas. Los votantes, además, han estado muy contentos con esta estrategia de posponer las decisiones dolorosas. No nos engañemos: la responsabilidad de nuestra situación no recae solo en los políticos.

¿Podrá el nuevo gobierno acometer las reformas necesarias? Espero que sí, por el bien de todos, pero no soy muy optimista.

En el escenario que considero más probable, algunos de nuestros problemas se manejarán mejor que durante la última década. Pero el equilibrio político-económico generado por la estructura social y demográfica de España no favorece las reformas profundas. Y eso puede llevarnos a un disgusto serio a medio plazo.

Intentaré explicar todo esto, y mucho más, durante mi charla.

Un par de comentarios.

Primero, no, lo siento, pero no creo que haya un vídeo de la charla. Si las circunstancias técnicas cambian, lo avisaré.

Segundo, sí, este es un foro nuevo para mí, después de muchos años en otro sitio. Vengo porque IE está haciendo un esfuerzo serio por organizar un buen grupo de economía, liderado por @NunoGalo. Es una iniciativa que quiero apoyar de corazón.

Y, sobre todo, IE está firmemente comprometido con la libertad de expresión de sus conferenciantes. No hay nada más importante para un académico que su independencia.

¡Nos vemos!

The United States has a total fertility rate of 1.57 children per woman. Many people ask why it is so low. That is the wrong question. The right question is why it is so high. At American income levels, the typical country has about 1.34. In fact, the United States has always had exceptionally high fertility given its income.

Let me explain. You can decompose a country’s fertility rate into three components: an income curve, a country-specific component, and a timing component. The income curve shows the fertility rate of the typical country at a given GDP per capita. That is, we look at all countries and calculate the average fertility rate for a country with, say, $10,000 in income per capita (in purchasing power parity, to control for differences in price levels). The country-specific component shows how much a country sits above or below that curve because of its own features: religiosity, family structure, social values, etc. The timing component captures the booms and busts that move births from one year to another (e.g., an economic boom, a depression, or a war).

To build the income curve, I use the 1985 cross-section of countries up to $19,500 in GDP per capita and the 2022 cross-section above that level (both in 2011 dollars, that is, controlling for inflation). The two curves meet almost perfectly at $19,500: the same fertility rate and the same slope. I drop the six Gulf oil exporters because their wealth comes from oil rents, not from economic development.

The curve uses no time-series data for the United States. It comes from a cross-section of 157 countries in 1985 and 2022, with the United States as just one more point. I use 1985 data because, last Monday, I showed that the relationship between fertility and income across countries, which had barely changed for many decades, shifted after 1985. I use 2022 data for very rich countries because, in 1985, there were almost none, making it impossible to accurately predict a “typical” fertility rate.

For the United States, I use two series. The first is the period total fertility rate (TFR) from 1820 to 2022 (for white women before 1933, from Michael Haines, and for all women after 1933, from the Human Fertility Database). The second is completed fertility, the number of children women in each birth cohort actually had over their lives, for cohorts born between 1828 and 1974 (for married women before 1918, from Jones and Tertilt, and for all women after 1918, from the Human Fertility Database). I place each cohort at the GDP per capita in the year the cohort turned 28.

In the figure, you will see that the cloud of points for the United States is nearly always above the income curve. So I multiply the income curve by a single number, 1.22, to best fit the US data. With that one number, the curve predicts 6.8 children per woman at the US income of 1820, when white American women had 6.7, and 1.68 at the US income of 2022, when American women had 1.67. Two centuries apart, and the same curve, scaled by the same number, gets both ends right. The United States has followed the income curve remarkably well for over two centuries, but it has stayed 22% above it!

That is, if I tell you that the average country on Earth was doing in terms of fertility in 1985 at $10,000 (none of which was the United States), and you multiply that number by 1.22, you get the United States’ fertility when US income per capita was $10,000. In 1985, the average country with $10,000 of GDP per capita had 2.82 children per woman. Multiply by 1.22, and you get 3.44. In 1910, when US GDP per capita was $9,916, white American women had 3.42 children. You got to love econometrics!

What do I learn from this?

First, nothing about the United States’ fertility is exceptional in terms of its movement along the income curve. The United States has followed the fertility pattern it was supposed to follow.

Second, what is exceptional about the United States is that American women have had about 22 percent more children than women in the typical country at the same income, and they have had them since at least 1820. My guess is that the reasons are cheap land (first the frontier, now suburbs and housing far cheaper than in Europe or East Asia), relatively high religiosity, and an economy where having a third child does not end a career. Given the United States’ income, its fertility rate should be around 1.34, not 1.57. The extra 0.23 is the United States’ country-specific factor.

Now the timing component. In the TFR, the Great Depression puts the United States at 2.0 children per woman below the scaled curve in 1933, and the baby boom puts the country 1.5 children above in 1959. But a lot of this is just timing. In completed fertility, both gaps shrink: women born in 1908, who had their children during the Depression, sit 0.9 below the scaled curve, and women born in 1934, the mothers of the baby boom, sit 1.1 above. Much of what looked like a collapse of fertility in the 1930s and an explosion in the 1950s was American women postponing births and then catching up (with some under- and overshooting).

So, if you think that either the Great Depression or the baby boom somehow contradicts the downward-sloping income curve, you are confusing a high-frequency movement with a low-frequency one.

In summary: the United States is not exceptional in how its fertility responds to income. The United States has followed the same income curve as every other country, with a higher level. The big swings everyone remembers (the Depression and the baby boom) were short-run deviations that one should expect given historical events.

Every time I think European voters cannot be more in denial about pensions, they prove me wrong: they are even more in denial than in my worst nightmare.

The average French person believes there are 6.4 workers for every retiree. The real number is about 1.8.

Today, Foreign Affairs publishes a long essay I wrote summarizing some of my work on the global fertility collapse:

foreignaffairs.com/united-states/…

It was a fantastic experience (with great editorial support) because the essay pushed me beyond pure economics to discuss issues such as geopolitics and polarization. Unlike some commentators, I don’t think the first-round economic consequences of fertility decline matter most; the second-round political and social ones do.

Yes, social security systems worldwide are in danger, but reality will impose itself sooner or later. The same politicians who swear over their ancestors’ tombs that retirement benefits will remain untouched will cut them (even if they are French). It will not be pretty, and most likely the cuts will come only after a major crisis and after politicians have tried everything else and failed.

Similarly, businesses will adapt to shrinking markets and valuations. Those who claim that capitalism somehow needs constantly expanding markets will be proven wrong. After all, this is the same misguided understanding of markets that has been proven wrong again and again since September 14, 1867, and that nobody really believes unless they have had the misfortune of earning a Ph.D. in a humanities department at an Ivy League school.

The real consequences will come when collapsing populations poison political systems. Look at the recent elections in eastern Germany. That is the future for all of us.

Also, the relative standing of great powers will shift drastically. Given current demographic trends, the U.S. will have a larger population than China by around 2100. The exact date depends on assumptions about net immigration into the U.S., but even with zero net immigration, the U.S. will overtake China by 2128. And Russia’s demographic future is only slightly more optimistic than China’s.

Those who dismiss these changes forget how antiquity ended in Western Europe. The western part of the Roman Empire entered acute demographic decline around 200 CE. By 476 CE, the western empire no longer existed. Despite some revisionist views that have cast a more positive light on late antiquity (and rightly corrected what was sometimes an overly negative assessment of the period), the fact is that England or France in 600 CE had lost most of their classical heritage, and material life had lost at least an order of magnitude in sophistication. The eastern part of the empire, however, weathered its demographic collapse much better and lasted another millennium.

No, I don’t believe we will go extinct (the Amish and Haredi will be enough for the survival of humankind), but the world will be very different in 2200 regardless of how you feel about it. The rational is the real and the real is the rational.