EC348 Development Economics Chapter 6 Lecture - Population Growth and Economic Development: Causes, Consequences, and Controversies

The Basic Issue: Population Growth and Quality of Life Six major issues: Will developing countries be able to improve levels of living given anticipated population growth? How will developing countries deal with the vast increases in their labor forces? How will higher population growth rates affect poverty? Will developing countries be able to extend the coverage and improve the quality of health care and education in the face of rapid population growth? Is there a relationship between poverty and family size? How does affluence in the developed world affect the ability of developing countries to provide for their people?

Some Main Determinants of Population Growth Status of women Social security Cost of children Urbanization Health Education Marriage age Labor force status We will look at health, education and the role of women in more detail in the next lecture.

Estimated World Population Growth

World Population Growth, 1750-2050

World Population Distribution by Region, 2010 and 2050

Population Growth: Past, Present, and Future Structure of the world’s population Geographic region Fertility and Mortality Trends Rate of population increase Birth rates, death rates , Total fertility rates Age Structure and dependency burdens http://www.geohive.com

Fertility Rate for Selected Countries, 1970 and 2012

Population Growth: Past, Present, and Future The Hidden Momentum of Population Growth High birth rates cannot be altered overnight Age structure of developing country populations

Population Pyramids

Population Behavior The Malthusian Model Thomas R. Malthus believed that population would expand as long as food supply allowed Assumption that the “passion between the sexes” would lead to increased fertility whenever conditions allowed for it  any improvements in living standard (due, for example, to good weather) would end up being reflected in a larger population Economically, it is as if he assumed that number of children was a “normal good”: any increase in income would be reflected in parents having more children

Population Behavior The Malthusian Model Also, he was writing in a time when the most important input in production – apart from labor – was land So he also assumed that any increase in population would take place at the expenses of living standards Since amount of land was fixed, increases in population would ultimately lead to a reduction in the amount of food available Together with the assumption related to the behavior of fertility, this determines the behavior of population in the Malthusian framework

Population Behavior This movement towards a constant level of income in the model would take place via what Malthus called “positive checks” mechanisms: If population increased for some exogenous reason, some catastrophe was bound to happen, so that initial level of living standards would end up being restored Famines, wars, and epidemics would be the mode of operation of Malthus’s “checks” This is the classic Malthusian idea that population tends to grow at a geometric rate, while food supply tends to grow at an arithmetic rate  in the long run, there’s not enough food available, and “positive checks” are needed to equilibrate population and food supply

The Malthusian Population Trap

Population Behavior The gloomy and hopeless predictions of Malthus gave economics its nickname: “The Dismal Science” It seems that, until the 18th century, most of the world behaved according to the predictions of the Malthusian model: population growth was very limited, and living standards were roughly constant But during the 18th century and afterwards, some countries started experiencing sustained improvements in living standards and increases in population, without the presence of a countervailing Malthusian mechanism After the demographic transition, everything changed

Population/Definitions Crude birth rate = # of births/population (in thousand) Crude death rate = # of deaths/population (in thousands) Rate of natural increase = Birth rate – Death rate (as percentage) These rates are affected also by the age distribution of the population, and that’s why they are called “crude” For example: country A may have a higher crude death rate than country B just because country A’s population has a higher fraction of “old” people In this case, country A may have a higher death rate even if mortality rates in every single age are lower in country A than in B To construct measures that are not affected by the age distribution, we can concentrate on age specific mortality rates, life expectancy, or fertility rate

Population/Definitions Infant mortality rate = deaths in the first year of life per 1,000 live births Other age specific mortality rates can be defined, using only population and number of deaths at some specific age; for example: Mortality rate at age 18 = # of deaths at age 18/population at age 18 Life expectancy at birth = Expected years of life of an individual if age specific death rates remain constant Number of deaths during the first 28 completed days of life per 1000 live births in a given year or period. Neonatal deaths

Population/Definitions Similarly, we can define age specific birth rates for women: Birth rate for women at age 25 = # of births from women at age 25/female population at age 25 Total fertility rate = number of children that a woman is expected to have in her lifetime if age specific birth rates remain constant Life expectancy and fertility rate do not depend on the age distribution of the population because they are constructed with age specific mortality rates and birth rates, respectively

Looking at Some Data http://unstats.un.org/unsd/demographic http://www.indexmundi.com Data on Infant Mortality http://www.geographyiq.com/ranking/ranking_Infant_Mortality_Rate_aall.htm

Demographic Transition One of the most important social changes in the history of humankind is the so called “Demographic Transition” The demographic transition is a process of change from a situation with high mortality and fertility (and constant population), to a situation with low mortality and fertility The process is characterized by an initial reduction in mortality rates (increase in life expectancy), followed with some delay by a reduction in fertility rates

Demographic Transition In the interval between the mortality reductions and the fertility reductions, population tends to experience accelerated growth (given the increased rate of natural growth) All countries that ultimately achieved a high level of economic development went through the demographic transition Therefore, it is usually thought that the demographic transition is a necessary condition for the onset of the process of economic development

Demographic Transition (Stages) Stage I: High birthrates and death rates Stage II: Continued high birthrates, declining death rates Stage III: Falling birthrates and death rates, eventually stabilizing

The Classic Stages of Demographic Transition Note: Natural increase is produced from the excess of births over deaths. Source: Population Reference Bureau

Demographic Transition Changes in health and fertility have important consequences for investment in education, and this is likely to be the link between the transition and economic growth This process took place first in some Western European countries, starting in the mid nineteenth century, but today it’s completely widespread (Latin American and Southeast Asian countries experienced it mostly in the pos-war) The vast majority of people today lives in countries where population is expected to stabilize in the next fifty years

Demographic Transition In reality, more than 60 countries already have fertility rates below “replacement rates” (= 2.1; the level just necessary to keep population constant) The transition can be described roughly as: Changes in life expectancy at birth from 40 years to around 70 years Reductions in total fertility rates from around 6 points to close to 2 points or below Today it is thought that virtually all countries in the world either have gone or are going through the demographic transition; the only exception are some African countries (Sub-Saharan), which still have very low life expectancy levels

Demographic Transition in England Let’s look at some historical examples (why the dips?) Todaro and Snilth, Economic Development Copyright © 2006 Pearson Addison-Wesley. All rights reserved.

The Demographic Transition in Western Europe

The Demographic Transition in Developing Countries

Todaro and Snilth, Economic Development Copyright © 2006 Pearson Addison-Wesley. All rights reserved.

Transition: Some Asian Countries Todaro and Snilth, Economic Development Copyright © 2006 Pearson Addison-Wesley. All rights reserved.

Transition: Some Latin American Countries Todaro and Snilth, Economic Development Copyright © 2006 Pearson Addison-Wesley. All rights reserved.

Transition: Some African Countries Todaro and Snilth, Economic Development Copyright © 2006 Pearson Addison-Wesley. All rights reserved.

Some African Countries that Have Not Started the Demographic Transition Todaro and Snilth, Economic Development Copyright © 2006 Pearson Addison-Wesley. All rights reserved.

The Microeconomic Household Theory of Fertility The Causes of High Fertility in Developing Countries: The Malthusian and Household Models The Microeconomic Household Theory of Fertility The Demand for Children in Developing Countries First two or three as “consumer goods” Additional children as “investment goods”: Work on family farm, microenterprise Old age security motivation

Microeconomic Theory of Fertility: An Illustration

Under neoclassical conditions, we would expect: The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Demand for Children Equation Where Cd is the demand for surviving children Y is the level of household income Pc is the “net” price of children Px is price of all other goods tx is the tastes for goods relative to children Under neoclassical conditions, we would expect:

The above list provides a framework for policy. The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Causes of, and Policy Responses to, High Fertility in Developing Countries: Lessons from Microeconomic Household Models Fertility may be lowered with: Improved women’s education, role, and status Female nonagricultural wage employment Rise in family income levels through shared growth Reduction in infant mortality, better health care Development of old-age and social security plans Expanded schooling opportunities, lowered real costs Lowered prices and better information on contraceptives Direct incentives such as subsidy benefits Policies that have the effect of reducing boy preference The above list provides a framework for policy.

The Consequences of High Fertility: Some Conflicting Perspectives Population growth: “It’s Not a Real Problem”: The real problem is not population growth but the following, Underdevelopment World resource depletion and environmental destruction Population Distribution Subordination of women Overpopulation is a Deliberately Contrived False Issue Population Growth is a Desirable Phenomenon

The Consequences of High Fertility: Some Conflicting Perspectives “Population Growth Is a Real Problem” Extremist arguments Theoretical arguments Empirical arguments Lower economic growth Poverty Adverse impact on education Adverse impact on health Food issues Impact on the environment Frictions over international migration

Goals and Objectives: Toward a Consensus Despite the conflicting opinions, there is some common ground on the following: Population is not the primary cause of lower living levels, but may be one factor Population growth is more a consequence than a cause of underdevelopment It’s not numbers but quality of life Market failures: potential negative social externalities Voluntary decreases in fertility is generally desirable for most developing countries with still-expanding populations

Goals and Objectives: Toward a Consensus Some Policy Approaches Attend to underlying socioeconomic conditions that impact development Family planning programs should provide education and technological means to regulate fertility Developed countries have responsibilities too

Some Policy Approaches What Developing Countries Can Do Persuasion through education Family planning programs Address incentives and disincentives for having children through the principal variables influencing the demand for children Coercion is not a good option Raise the socioeconomic status of women Increase employment opportunities for women (increases opportunity cost of having more children, as in microeconomic household theory

Some Policy Approaches What the Developed Countries Can Do Generally Address resources use inequities More open migration policies How Developed Countries Can Help Developing Countries with Their Population Programs Research into technology of fertility control Financial assistance for family planning programs

Some More Key Population Terminology Physiological Attributes (age, gender, ethnicity) Social Attributes (employment status, income, mobility) Cohort (group of people sharing a vital element/characteristic e.g. age: 0-5, 6-10, etc.) Density (no. of people per km2 or mile2)

Dependency Ratio Population can be divided into three groups: 1. Below 16 yrs (Youth) 2. 16-65 (Adult) 3. +65 (Elderly) Assumption: Adult cohort is “economically active” and must therefore support the other two “dependent” groups D = (y + e)/a x 100 Where y = number of youths e = number of elderly a = number of adults Dependency ratio is therefore an expression of how many people every 100 economically active adults must support The dependency resources has an effect on public policy. The more dependents, the further resources must be stretched, and when resources are scarce, trade-offs in public spending must occur (with social costs) Give some examples.

http://knowledge.allianz.com/?814

Addressing the Problems Population policies Balancing rural/urban populations Slowing actual birth rate Need support of: Political leadership Business and commercial interests Religious leaders Intellectual and community leaders Family planning techniques Sterilization Abortion Technology transfer Medicine and healthcare Agriculture Fertility control Human rights issues Expand not limit human rights Problem with coercive measures Selective birth

Concepts for Review Birth rate Death rate Demographic transition Doubling time Family-planning programs Fertility rate Hidden momentum of population growth Life expectancy at birth Malthusian population trap Microeconomic theory of fertility Mortality rate Natural increase Net international migration Population-poverty cycle Population pyramid Rate of population increase Reproductive choice Total fertility rate (TFR) Under-5 mortality rate Youth dependency ratio