ELIZABETH DWENGER

00. Overview

Causal Inference Birth Rate.

South Korea 2001: Pronatalist cash transfer policy
Russia 2006: "Maternal capital" program
Japan 1994: Angel Plan

Actual Birth Rate

Policy Introduction

Counterfactual Projection

95% Confidence Interval

Policy Impact Summary

Select a country and adjust parameters to see the estimated policy impact.

01. Overview

Introduction.

Birth rates in developed countries are plummeting, with most nations now falling below the population replacement rate (source). This unprecedented demographic shift threatens to reshape economies, as shrinking workforces struggle to support aging populations. Without a major economic transformation, the next generations may face declining living standards and a labor shortage too severe to sustain long-term growth.

Discussion

My friend and I had a lengthy discussion where we explored potential solutions, particularly the role of artificial intelligence in mitigating workforce shortages. We shared the assumption that reversing the declining birth rate trend is extremely difficult, if not impossible.

Some key points from our discussion:

- Once a country reaches a certain level of development, having children may become a lower priority.
- Japan serves as a strong case study since it resists immigration and faces a rapidly aging population.
- Even in countries that welcome immigration, if global birth rate declines persist, there may eventually be too few people to fill workforce gaps—even through immigration.
- The trend appears to be universal, cutting across cultures and persisting despite government incentives.

The Central Question

Given that the articles argue governmental aid and incentives have had limited success, I wanted to investigate from a causal inference perspective:

Are these incentives actually making a difference?

02. Methodology

Methodology.

Methods Used:

- Difference-in-Differences (DiD)
- Synthetic Control Method
- Doubly Robust Estimation
- Causal Graph Visualizations (DAGs)

03. Conclusion

Take aways.

From the analysis, it appears as though birth rate incentives can work in the short term; however, they do not appear to lead to any significant difference in long-term birth rate outcomes. In Japan, for example, the average increase was just 0.04 children per woman above the projected trend. While this suggests the policies may slightly boost fertility rates in the years immediately following implementation, the effect seems too small to meaningfully alter demographic trajectories. This reinforces the idea that such policies are unlikely to reverse population decline on their own and may need to be paired with broader structural or cultural interventions to achieve sustained change.

04. Sources