1 chapter 6 lecture - population growth and economic development: causes, consequences, and...

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Chapter 6 Lecture - Population Growth and Economic Development:

Causes, Consequences, and Controversies

EC348 Development Economics

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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?

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Some Main Determinants of Population Growth

HealthEducationMarriage ageLabor force status

Status of womenSocial securityCost of childrenUrbanization

We will look at health, education and the role of women in more detail in the next lecture.

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Estimated World Population Growth

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World Population Growth, 1750-2050

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World Population Distribution by Region, 2010 and 2050

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Population Growth: Past, Present, and Future

Structure of the world’s population

Geographic regionFertility and Mortality TrendsRate of population increase Birth rates, death rates , Total fertility ratesAge Structure and dependency burdens

http://www.geohive.com

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Fertility Rate for Selected Countries, 1970 and 2012

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Population Growth: Past, Present, and Future

The Hidden Momentum of Population GrowthHigh birth rates cannot be altered overnightAge structure of developing country populations

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Population Pyramids

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Population Behavior

The Malthusian Model

Thomas R. Malthus believed that population would expand as long as food supply allowedAssumption 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

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Population BehaviorThe Malthusian Model

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

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Population BehaviorThis 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

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The Malthusian Population Trap

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Population BehaviorThe 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

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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” peopleIn 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

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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 constantNumber of deaths during the first 28 completed days of life per 1000 live births in a given year or period. Neonatal deaths


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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


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Looking at Some Data

http://unstats.un.org/unsd/demographic

http://www.indexmundi.com

Data on Infant Mortalityhttp://www.geographyiq.com/ranking/ranking_Infant_Mortality_Rate_aall.htm

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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 fertilityThe 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

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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 transitionTherefore, it is usually thought that the demographic transition is a necessary condition for the onset of the process of economic development


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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

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Time

Stage 1 Stage 2 Stage 3 Stage 4

Naturalincrease

Birth rate

Death rate

Note: Natural increase is produced from the excess of births over deaths.

The Class ic Stages of Demographic Trans ition

Source: Population Reference Bureau

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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 growthThis 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


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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 yearsReductions 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


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Demographic Transition in England

Life Expectancy at Birth

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25

30

35

40

45

50

55

60

1541 1581 1621 1661 1701 1741 1781 1821 1861 1901

year

Total Fertility Rate

2

2.5

3

3.5

4

4.5

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5.5

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1541 1581 1621 1661 1701 1741 1781 1821 1861 1901

year

Logarithm of the Real Wage

5.55.75.96.16.36.56.76.97.17.37.5

1541 1581 1621 1661 1701 1741 1781 1821 1861 1901

year

Let’s look at some historical examples(why the dips?)

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

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The Demographic Transition in Western Europe

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The Demographic Transition in Developing Countries

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Transition: Some Asian Countries


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Transition: Some Latin American Countries


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Transition: Some African Countries


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Some African Countries that Have Not Started the Demographic Transition


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The Causes of High Fertility in Developing Countries: The Malthusian and Household Models

The Microeconomic Household Theory of FertilityThe Demand for Children in Developing Countries

First two or three as “consumer goods”Additional children as “investment goods”:Work on family farm, microenterpriseOld age security motivation

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Microeconomic Theory of Fertility: An Illustration

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The Causes of High Fertility in Developing Countries: The Malthusian and Household

Models

nxtPPYfC xxcd ,...,1),,,,( Where

Cd is the demand for surviving childrenY is the level of household incomePc is the “net” price of childrenPx is price of all other goodstx is the tastes for goods relative to children

Demand for Children Equation

0Y

Cd

Under neoclassical conditions, we would expect:

0

c

d

P

C0

x

d

P

C0

d

x

C

t

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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 statusFemale nonagricultural wage employmentRise in family income levels through shared growthReduction in infant mortality, better health careDevelopment of old-age and social security plansExpanded schooling opportunities, lowered real costsLowered prices and better information on contraceptivesDirect incentives such as subsidy benefitsPolicies that have the effect of reducing boy preference

The above list provides a framework for policy.

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The Consequences of High Fertility: Some Conflicting

PerspectivesPopulation 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 IssuePopulation Growth is a Desirable Phenomenon

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The Consequences of High Fertility: Some Conflicting

Perspectives“Population Growth Is a Real Problem”

Extremist argumentsTheoretical argumentsEmpirical arguments•Lower economic growth•Poverty•Adverse impact on education•Adverse impact on health•Food issues•Impact on the environment•Frictions over international migration

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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 factorPopulation growth is more a consequence than a cause of underdevelopmentIt’s not numbers but quality of lifeMarket failures: potential negative social externalitiesVoluntary decreases in fertility is generally desirable for most developing countries with still-expanding populations

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Goals and Objectives: Toward a Consensus

Some Policy Approaches Attend to underlying socioeconomic conditions that impact developmentFamily planning programs should provide education and technological means to regulate fertilityDeveloped countries have responsibilities too

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Some Policy Approaches

What Developing Countries Can DoPersuasion through educationFamily planning programsAddress incentives and disincentives for having children through the principal variables influencing the demand for childrenCoercion is not a good optionRaise the socioeconomic status of women Increase employment opportunities for women (increases opportunity cost of having more children, as in microeconomic household theory

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Some Policy ApproachesWhat the Developed Countries Can Do Generally

Address resources use inequitiesMore open migration policies

How Developed Countries Can Help Developing Countries with Their Population Programs

Research into technology of fertility controlFinancial assistance for family planning programs

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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)

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Dependency RatioPopulation 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.

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

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Addressing the Problems

Population policiesBalancing rural/urban populationsSlowing actual birth rateNeed support of:• Political leadership• Business and

commercial interests• Religious leaders• Intellectual and

community leadersFamily planning techniques

SterilizationAbortion

Technology transferMedicine and healthcareAgricultureFertility control

Human rights issuesExpand not limit human rightsProblem with coercive measuresSelective birth

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Concepts for Review

Birth rateDeath rateDemographic transitionDoubling timeFamily-planning programsFertility rateHidden momentum of population growthLife 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

1 chapter 6 lecture - population growth and economic development: causes, consequences, and...

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