1. NS4053 Spring Term 2017 Population/Demographics
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. Population I
“Population Debate Will Gain Prominence,” Oxford Analytica, October 25, 2011
Debate about how many people are too many has a long history
Confidence in humankind’s ability to feed and cloth itself has risen and fallen over the centuries
Work of Thomas Malthus ( ) has been associated with a pessimistic view of growing populations
His main worry was with the food supply but areas of concern have expanded since to include:
Water,
Mineral and energy resources, as well as
Environmental issues including effect of population on greenhouse gas emissions and hence world’s climate.

3. Population II Pessimistic View
Neo-Malthusians stress that many improvements the world has experienced have been due to increased use of:
Fossil fuels and
Nitrogen-based fertilizers
Problem these have serious long-term effects that are starting to assert themselves:
Climate change provoked by green house gas emissions
Reduced soil fertility and
Pollution
Increasing populations are putting pressure on water supplies and ancient aquifers are beginning to run dry
Prices of key minerals and food have been rising for most of the last decade
Result: may generate political instability as food and household costs escalate

4. Population III Optimistic View Important to distinguish between
short term – where prices rise and resources become scarce and
Long term within which human ingenuity responds to those changes by finding new ways of fulfilling needs and wants more easily and cheaply
In addition not all problems of environmental degradation, resource scarcity and price rises are due to population increase
In many situations bad politics, social injustice, corruption and conflict cause more harm
Economic success of emerging economies in recent decades as increased demand for commodities and in the absence of an equivalent increase in production and thus their prices.

5. Population IV
While the Classsicals tended to look at growing populations as a threat to prosperity, we now often view growing populations as important for growth
As countries transition from high to low death and birth rates, the population’s age structure changes and the economically dependent-proportion declines
This transition can create one (or more) forms of “demographic dividend”:
Labor supply increases as a greater proportion of total populations joins the working age group (15-64 years)
As each worker’s number of dependents falls, the worker is able to save more to finance deepening of the capital stock and to raise labor productivity
As dependency declines, more can be invested in healthcare and education for each child raising the quality of the human capital stock
As per capita income increases, demand increases for consumer goods.

6. Population V
Some analysts attribute the extremely fast economic growth in a number of Asian countries – Hong Kong, Singapore, and South Korea between the 1960s and 1990s to a demographic dividend
Studies argue that a sizable portion – in some cases up to one third, of the increase in GDP per capita during those decades could be ascribed to positive impact of demographic changes.
However unclear whether this experience is repeatable elsewhere and
Whether in other countries similar demographic changes could actually have adverse effects
Moreover seem to be scope for significant economic development even without such demographic changes.

7. Population VI

8. Population VII
Even if a country experiences an increase in the relative size of its working age population there is no guarantee this will turn into economic development
What happens will depend on the use that the government and private sector make of such a window of opportunity to:
Increase the workforce participation rate – the proportion of the working age population that is productively employed; and
Provide opportunities for the efficient investment of the expected higher levels of savings associated with a larger working age population.

9. Population VIII
Important areas of public policy that need to make use of the demographic dividend include
Improving and making the public health system more effective
Increasing the provision and quality of education
Introducing economic policies that promote labor market flexibility, openness to trade and savings.
Negative Scenario
A reduction in the number of children can provide breathing space for countries enabling them to develop infrastructure and policies capable of yielding higher growth rates in the future

10. Population IX
Yet trying to coordinate such a combination of demographic and institutional changes may prove difficult;
Country could find itself in a situation where hit has a high proportion of working age citizens who are not productively employed
Might be left unprepared for an inevitable aging of its population
Rather than a demographic dividend the country could experience problems of youths
In these situations the unemployed or underemployed are often prone to violent behavior

11. Population X
Many countries are now more concerned with declining or slowing rates of population growth
Demand side started with Hansen and the stagnationists in the 1930s – slowing population would require less investments – feeding back to slack demand and slow growth -- vicious circle
Supply side view – neoclassicals 1950s – demographic dividend facilitated East Asia miracle
Over the next 40 years Japan and Europe will see working-age populations shrink by 30 million and 37 million respectively
China’s working age population will keep growing for 15 years or so then turn down.
In 2050 China will have 100 million fewer workers than it does today

12. Population XI