NBER Model Predicts U.S. Economic Hegemony Over China by 2100 Due to Demographics and AI

The common narrative is that China's economic eclipse of the United States is inevitable, driven by sheer population size and rapid technological catch-up. For years, long-term models projected that the Chinese economy would dwarf America's by the end of the century. But new data is upending that consensus, suggesting the U.S. will maintain its lead.[1]

A comprehensive new working paper from the National Bureau of Economic Research (NBER) projects that by 2100, the United States will retain its position as the world's dominant economic power. The reversal is driven by two colliding forces: a steeper-than-expected collapse in Chinese fertility rates, and the compounding effects of artificial intelligence on capital returns.[1][2]

The NBER model, developed by economists Seth G. Benzell, Laurence J. Kotlikoff, and Victor Yifan Ye, simulates the global economy across 17 regions comprising 99% of the world's population. It integrates dynamic life-cycle behaviors, idiosyncratic mortality, and region-specific fiscal policies to forecast how demographic and technological shifts will alter global power over the next eight decades.[1][3]

The mechanism hinges on the United Nations' updated 2024 World Population Prospects, which serve as the demographic bedrock for the NBER model. The 2024 UN data is markedly more pessimistic about China's fertility than previous estimates, projecting a much steeper population decline.[1][4]

In 2022, models using older UN data projected China's share of global GDP would rise to 27% by 2100, while the U.S. share would shrink to 12%. The 2024 data flips that trajectory entirely.[4]

Under the revised demographic baseline, China's share of global GDP is projected to fall from 25.6% today to just 14.9% by 2100. Simultaneously, the U.S. share is forecast to rise from 11.2% to 14.4%.[1]

The demographic transition creates a "baby bummer" effect—a massive global aging wave that fundamentally alters the balance of capital and labor. As populations age, the ratio of wealth-holding retirees to active workers increases, leading to a global capital glut.[1][3]

This capital glut drives down long-run real capital returns and forces payroll taxes higher to fund old-age benefits. The net result is a shrinking of total global output by roughly 10% compared to previous forecasts, fundamentally reshaping the macroeconomic environment.[1][3]

But demographics are only half the equation; the model also introduces the variable of frontier automation. The researchers modeled scenarios where AI expands capital's share of production at an accelerated rate, fundamentally altering how economies generate wealth.[1]

In a "Transformative AI" scenario—defined as 10 times faster growth in capital's share—the technological advantage heavily favors early adopters with flexible capital markets. Because AI and automation are highly capital-intensive, they reinforce the demographic forces already favoring the United States.[1][2]

Under this Transformative AI scenario combined with the 2024 demographic data, the U.S. share of global GDP surges to 25.3% by 2100, while China's share settles at 16.9%. The U.S. effectively doubles its baseline economic footprint relative to the rest of the world.[2]

The mechanism here is that countries with rapidly shrinking workforces and high interest rates—like China in the latter half of the century—will struggle to adopt frontier technologies as quickly. The U.S., by contrast, maintains a technological edge and benefits from a more stable demographic profile, allowing it to capitalize on the AI-driven productivity boom.[1]

However, the evidence comes with significant caveats. The NBER authors explicitly note that their findings are highly sensitive to policy choices, particularly regarding immigration. The U.S. demographic advantage relies heavily on continued inflows of working-age people to offset its own aging population.[1][3]

If the United States were to eliminate all future immigration, the model shows its projected 14.4% share of 2100 global GDP would plummet to 9.2%, erasing its hegemonic advantage. The data underscores that American economic dominance is not guaranteed by technology alone, but requires a sustained demographic foundation.[2]

Furthermore, the speed and impact of AI remain highly uncertain. The "Transformative AI" scenario assumes a massive, sustained increase in automation that fundamentally alters the labor-capital dynamic. If AI development stalls or faces physical constraints, the economic divergence between the U.S. and China would be less pronounced.[1]

Ultimately, the NBER evidence pack suggests that the 21st-century economic race will not be won simply by the nation with the largest population or the most aggressive industrial policy. Instead, it will be determined by which country can best navigate the unprecedented collision of a shrinking global workforce and the rapid deployment of capital-intensive automation.[1]