November 21, 2011 Kyoto University Junichi Mori 1

“Population Growth is still an issue.” 2 UNPF, Sate of World Population 2004, P8

Population explosion ( 人口爆発） concentrates on poor regions 3

Developed countriesDeveloping countries Average 1% About 2.5% Endogenous phenomenon by economic growth Exogenous phenomenon by importation of health & medical technologies 4 The Characteristics of Population Growth  KUINEP In an economic model, an endogenous change is one that comes from inside the model and is explained by the model itself. An exogenous change is one that comes from outside the model and is unexplained by the model. 日本語： endogenous ( 内生的） exogenous ( 外生的）

Population growth and economic development 5 Exogenous ( 外生的） Endogenous （内生的） Exogenous population explosion is not paralleled by increase in employment and income.  Developing economics face with the serious problem of resource exhaustion, economic degradation, and destitution.  KUINEP

Correlation between population growth and economic growth 人口と経済成長の相関関係 6 Optimum population growth  acceleration of economic growth 経済成長の加速 Over and under population growth  constraint on economic growth 経済成長の制約 Population growth, which occurs in parallel with GNP growth would result in: - further acceleration of economic growth - enlargement of markets including products market and labor market - induction into specialization  KUINEP

Negative Influence of population growth on economy 人口成長が与える負の影響 7 If the population growth of a country is faster than the growth rate of GNP, then it has negative impact on the economy. population growth  GNP per capita decreases  purchasing power decreases substantially  shrinkage of various markets including products and labor market  vicious circle (shown as in Malthus model)  KUINEP

Population Growth 8 1. Natural increase （自然的増加） -The natural rate of Population growth (NR) - = the birth- rate (BR) - the death-rate (DR) 2.Social increase （社会的増加） - Migration  KUINEP

BR DR The Theory of Demographic Transition

Three phases of population growth Change in the birth- and death rates in the UK 10  KUINEP Hayami (2005)

Why is the theory of demographic transition important? To look for patterns which help explain changes in population growth rate To help predict changes in population growth rate and effective ways of controlling it 11

The population of Japan since the Jomon era 12 Source: 平成 16 年 少子化白書、

Japan’s demographic transition 13  KUINEP JICA (2003)

Phases of Japan’s demographic transition A period of high fertility rate and high mortality rate until 1870 A period of high fertility rate and low mortality rate between 1870 and 1960 A period of low fertility rate and low mortality rate since 1960 Rapid increase in the birthrate from Decline in the death-rate from Japan ’ s demographic transition was completed around

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The Malthus Model Hayami (2005), Development Economics p G G (W)

The household utility maximization model （家 計の効用最大化モデル） Hayami (2005), Development Economics p In order to understand this model, the concept of “ utility ” should be understood. “ A central principle of microeconomics is that households and firms optimize- they do the best they can for themselves given their objectives and the constraints they face. In microeconomic models, households choose their purchases to maximize their level of satisfaction, which economists call utility, and firms make production decisions to maximize their profits. ” (Mankiw, Gregory, “ Macroeconomics 5 th Edition p12) 17

Utility Utility is the abstract measure of satisfaction or happiness that consumers receive from money or goods they own or consume Utility Amount of Goods

Parent’s utility comes from… Instinctive pleasure, such as love of children and satisfaction of having heirs. Expected income from children for the household Security for parents during old age 19

Marginal Utility of Children 20 Utility Number of Children Marginal Utility Number of Children a b c a b c

Marginal Utility Line 21 MU0 Marginal Utility Number of Children

Disutility of having children Physical and psychological hardships in bearing and rearing children Costs paid for child-bearing and rearing Opportunity costs* of parents ’ labor used for child- bearing and rearing *opportunity costs of some items are what one has to give up to get that item. (Gregory Mankiw, “ Principles of Economics 3 rd Edition ” 2004, p51) 22

Marginal Disutility Line 23 Marginal Disutility Number of Children MD0

1 st phase: The initial equilibrium is found. 24 MD0 MU0 Marginal Utility / Disutility Number of Children MD0 n0 MD0

2 nd phase: Shift of marginal utility and disutility line 2nd Phase of demographic change Rightward shift of MUL Employment and income earning opportunity rises Social security and insurance market do not develop at this phase Upward shift of MDL Since labor law and primary school system not yet established, cost to rearing children doesn ’ t rise so much Opportunity cost of mothers to rear children rises 25

2nd phase: Shifts of utility and disutility lines 26 MU0 Marginal Utility / Disutility Number of Children MD0 n0 MD0 MD1 MU1 n1

3 rd Phase: Leftward shift of MUL and upward shift of MDL Leftward shift of MUL Reduced death rate reduced the utility of having children Increased social mobility decreases possibility that children live with parents together Further upward shift of MDL Education system develops and education cost of children rises Opportunity cost of mothers ’ to rear children rises very much 27

Later phase: Shift of utility and disutility lines 28 MU0 Marginal Utility / Disutility Number of Children MD0 n0 MD0 MD1 MU1 n1 MU2 MD2 n2

Demographic Change in East Asia Can we explain the demographic change in East Asia by using the household utility maximization model? Which countries belong to the early phase of MUL analysis? Which countries belong to the 2 nd phase of development? Which countries belong to the 3 rd phase of development? 29

Please consider how to explain by using the utility and disutility lines In China, parents should pay additional service fees, like school expenses, when they get a second child. What kind of effects this regulation may have on parents ’ behavior. In Bangladesh, the United Nations try to prevail the primary education by offering free lunch for children in the school. What kind of effects it may have on demographic change in the country? 30

Please explain the two cases described in the former slide. 31 MD0 MU0 Marginal Utility / Disutility Number of Children MD0 n0 MD0

Reference Hayami, Yujiro, “ Development Economics ” 2005, London Oizumi, Keiichiro, The effect of aging society in ASEAN 4 and China on macro economic development ( in Japanese) 大泉啓一郎 「 ASEAN4 と中国の少子高齢化とマクロ経済に及ぼす影響」 日 本総研 RIM 2004 Vol ４ Mankiw, Gregory “Macroeconomics 5th Ediction” 2003 、 New York Japan International Cooperation Agency (JICA), “ Second Study on International Cooperation for Population and Development New Insights from the Japanese Experience ”, November East-West Center, The Future of Population in Asia, Honolulu, alphabetic-list-of-titles/?class_call=view&pub_ID= alphabetic-list-of-titles/?class_call=view&pub_ID=1300 David Canning, The impact of Aging on Asian Development,. ADBI web site presentation.pdf 32