Many developed countries regard falling birth rates and ageing populations as a serious economic threat. 

Yet a recent study suggests that population decline may bring an unexpected advantage: it can push economies towards greater innovation.

The research, led by Daron Acemoglu, who received the 2024 Nobel Prize in Economic Sciences, examined seventy years of data from nearly every country with more than one million residents.

Its purpose was to explore how changes in population size influence long-term economic performance.

Global birth rates have fallen sharply, dropping from 3.78 births per 100 people in 1950 to 1.71 in 2025.

Although this trend is often associated with labour shortages and weaker demand, the study found that each percentage-point decline in the birth rate was linked to a 26.8% rise in GDP per working-age adult.

This increase was large enough to offset the loss in total output caused by a smaller population.

In other words, fewer workers did not necessarily mean a less productive economy.

One key explanation lies in technological change.

When labour becomes scarce, companies have a stronger incentive to invest in machines, software, and other labour-saving tools that allow fewer employees to produce more.

Countries with low birth rates also tended to employ more people in research-intensive industries, suggesting that innovation becomes more important when the workforce begins to shrink.

This expansion in high-tech activity may therefore be the main force behind stronger output per worker.

The researchers also considered several social changes that often accompany lower fertility.

Women may have more opportunities to enter paid employment, while agricultural economies can shift towards manufacturing because fewer people need to be supported by food production.

However, these factors could not fully explain the gains in productivity.

According to the paper, only higher investment in innovation consistently accounted for the stronger economic results.

The findings do not mean that population decline is free of risks, since ageing societies still face pressure on pensions, healthcare systems, and public finances. Nevertheless, they challenge the common assumption that fewer births must lead to economic stagnation.

A shrinking population may force societies to adapt rather than simply decline.

If businesses and governments respond by improving technology and using human talent more efficiently, demographic pressure could become a powerful engine of economic renewal.