1. Capturing the Demographic Bonus in Ethiopia
Luc Christiaensen and John May
HNP BBL Presentation at the World Bank - November 14, 2007

2. Central Theses
Accelerating the demographic transition in poor countries yields faster income growth and poverty reduction.
To do so, there are important pay-offs at the margin from complementing gender equitable development with demographic actions such as family planning.

3. Population and Development – The Demographic Bonus

4. Demographic transition changes the age structure

5. Rapid population growth slows economic growth
Rapid population growth (declining mortality) results in :
higher dependency ratios/lower savings
increasing demand for public investment in social services (health, education) at the expense of investment in productive goods and services (infrastructure)
changing land/labor and capital/labor ratios affecting productivity
 Slower economic growth
Malthusian and Boserupian responses (both in Ethiopia)

6. Followed by fertility decline, it spurs economic growth
When rapid population growth is followed by a decline in fertility:
dependency ratios decline, the share of working age population increases, and so do savings and private investment
Reduced public spending on social services frees up resources for public investment in productive goods and services (infrastructure)
This induces more rapid economic growth, the “demographic bonus.”

7. The demographic bonus can be large is NOT automatic
is larger, the faster the fertility transition.
How much is the gain in Ethiopia and how to accelerate the fertility transition?

8. Population and Development in Ethiopia Today

9. Ethiopia - a demographic giant …
Size:
78 million people, 2nd largest population in SSA, after Nigeria
Speed:
growing at 2.5 % resulting in 2 million people added per year;
Structure:
high dependency ratios (83+3)/100
youth bulge (50% between yrs old)
Space:
young population largely concentrated in the rural Highlands (15% urban)
Increasing land pressure and environmental degradation
landholdings per rural person more than halved since late 1960s
Inorganic fertilizer added equals amount removed
Resettlement
Chapter 1

10. … at the brink of its fertility transition
Annual population growth has declined from 3% in 1990 to 2.5% in 2005
U5MR (123/1,000 in 2005) continues to decrease and fertility started to decline as well (5.7 children per woman in 2005)
Marriage at early age is slowly declining, from 65% of the married women being married by age 18 in 2000 to 61.8% in 2005
The contraceptive prevalence rate increased from 8.1% in 2000 to 14.7% in 2005, but at 34% unmet demand remains high

11. Drivers of Mortality Changes
IMR and CMR are the main drivers of changes in CDR
Further reduction in child mortality will substantially reduce the CDR and thus foster population growth.
Female education, clean water access, being Muslim have major effects on CMR
The maternal mortality ratio is very high (673/100,000 live births in 2005), though the anticipated decline to reach the MDGs is unlikely to substantially affect the CDR or population growth
HIV/AIDS is unlikely to substantially affect CDR when maintained at the current levels

12. Drivers of Fertility Changes
Female education: key socio-economic variable
Income effect: doubling household income associated with fewer children on average
FP Knowledge among women in communities
Empowerment: Women in communities where women earn cash income have fewer children
Access to family planning services
Literature: lifetime exposure to FP reduces TFR by 0.5 to 1.5 child per women
Similar order of magnitudes found in Ethiopia

13. High demand for contraceptives generates an opportunity to accelerate the fertility decline

14. Population and Development in Ethiopia Tomorrow

15. Population Projections Scenarios
Reaching PASDEP with high FP
low fertility: TFR from 5.9 to 2.94
low mortality: U5MR from 166 in 2000 to 50 in 2030
Corresponds to UN Medium Variant
Assumes high family planning - CPR grows at 1.32% per year
Reaching PASDEP
high fertility: TFR from 5.9 to 3.65 in 2030
high mortality: U5MR from 166 to 76 in 2030
Corresponds to UN high variant
Assumes lower FP expansion - CPR grows at 0.9%/year
Both scenarios have same assumptions regarding mortality and fertility effects of HIV/AIDS

16. Simulated evolution of TFR
2000
2015
2030
Scenario 1
% women in union
63.59
59.16
53.09
Annual CPR increase 0.9%point/year
8.1
20.1
32.1
Simulated TFR
5.9
4.61
3.63
Scenario 2
Annual CPR increase 1.32%/year
27.9
47.7
4.25
2.87

17. In 2030, Ethiopia’s Population could be 135m (high) or 124m (low scenario)

18. Dependency Ratio Reaching .7 or .6

19. Macro Effects of Population Growth
GDP growth depends on factor accumulation (labor, capital, land) and TFP growth.
Lower population growth (following more spending on family planning) may influence growth and poverty reduction through:
Composition of public expenditures (skills/capital)
Labor market
Total factor productivity
MAMS- Maquette for MDG Simulations
a dynamic economy-wide model of Ethiopia run from
earlier used to analyze scenarios to reach the MDGs and to develop poverty reduction strategies.

20. The powers of MAMS Public spending Labor market
Ethiopia specific production and cost functions of social services
Family planning explicitly accounted for
Other public infrastructure (roads and energy) and other government
Government and country operate under budget constraints, closed either through government borrowing or direct taxation trade-offs are explicit
Labor market
Three types of labor (unskilled, semi-skilled, skilled)
Labor markets clear through wage adaptation for each labor category; unemployment is implicit—only a share of those entering the labor market are employed, this ratio is fixed over time
TFP growth is assumed independent of population growth
Population growth enters exogenously, but consistent with observed behavior
Tool for comparing welfare effects of different population growth scenarios and thus cost-benefit analysis of more rapid FP expansion

21. Simulation assumptions
Scenarios simulated with MAMS for the period :
(1) Higher pop growth with low spending on FP; government budget balanced through changes in direct taxes or domestic govt borrowing
(2) Lower pop growth with higher FP spending (52 million US$ in 2030)
Population projections:
Exogenous paths for total population and cohorts entering the first year of primary school and the labor force;
High population growth scenario has a higher dependency ratio and a smaller population share in working age.
The different scenarios are identical in terms of:
Educational quality (resources per student)
Health indicators
Access to safe water and sanitation (MDGs 7a and 7b)
Government per-capita spending in other areas.
Aid and other inflows from the rest of the world.

22. MAMS simulation results
% growth per year,
Higher pop growth, direct taxation, low fp
Lower pop growth, high fp
Gap
low-high
School enrollment
4.4
3.6
-0.8
Labor force
0.93
0.75
-0.18
Government consumption
5.89
5.43
-0.46
Government investment
5.82
5.2
-0.62
GDP at factor cost
5.1 5
-0.1
Private investment
4.59
4.85
0.26
Private capital stock
3.8
0.2
Private consumption
5.05
5.07
0.02
Priv. consumpt. per cap
2.8
3.1
0.3

23. With more rapid family expansion, there are 1
With more rapid family expansion, there are 1.5 to 3m less poor people in 2030

24. Capturing the demographic bonus – policy implications

25. Development is the Best Contraceptive, but Contraceptives are Good for Development
Fostering female education and empowerment is quantitatively the most important entry point  about 75% of the simulated decline in TFR induced by gender equitable development
Especially more rapid family planning expansion provides substantial complementary benefits at low cost  reduction in TFR following lifelong FP exposure
But also gains from promoting a more enabling population policy environment (political commitment, sustained government financing, proper institutional arrangements, and better M&E)

26. Demand for contraceptives is high
Unmet needs for FP are still great: 34% of married women have expressed an interest in 2005
The growing use of FP has barely kept up with the increasing demand (unmet demand in 2000 estimated at 36%)
 Improving access to contraceptives, while continuing IEC and BCC services

27. Expanding coverage of family planning services to remote rural areas
The MOH intends to deploy 30,000 Health Extension Workers (HEWs)
Engaging the private sector and NGOs (abolishment of taxation on contraceptives)
Linking HIV/AIDS and FP/RH services
CBRH agents (compensation)

28. Community-based Reproductive Health Agents (CBRHAs) Play a Key Role

29. Improving availability of contraceptives at existing distribution points
Implementing a new supply-chain system (coordination/consultation of regions, provision of basic logistics in local warehouses, logistics typically not or poorly funded (govt or donors)
Initiating long-term planning for financing contraceptives, at all levels

30. Improving quality of family planning
Expand the range of contraceptives available, including long term
Recruitment, training and deployment of qualified health personnel

31. Thank you !