Does human capital compensate for depopulation?

Fertility rates have been falling persistently over the past 50 years in most developed countries around the world. Simultaneously, the trend in outward migration from poorer to richer countries has been steady. These two forces have contributed to declining population growth and in some countries even to depopulation. In this paper, we quantify the extent to which the negative effect of decreasing fertility on the aggregate human capital stock of a country is compensated for by increasing education and health investments - both of which raise individual human capital. We find that declining fertility is not fully, but partly compensated when including the full set of countries in our regressions. When focusing on depopulation countries, the compensatory effect is substantially weaker and, in many specifications, even insignificant.