Population Growth andPopulation Growth and Economic Developmentp

AEB 4906Development Economicsp

http://danielsolis.webs.com/aeb4906.htm

Facts on world populationFacts on world population

Total world population: 6.1 billionTotal world population: 6.1 billionAbout 75% of people live in developing countriesAbout 60% of the population lives in Asia and OceaniaAbout 40% of people live in only 15 countriesBy 2200, over 90% of population will live in y 00, o e 90% o popu at o ewhat today are developing countries

TopicsTopics

Demographic measuresDemographic measuresPopulation growth in the worldTheories of populationTheories of populationPolicies

Demographic measuresDemographic measures

BirthrateBirthrate Death rateR t f t l iRate of natural increaseInfant mortality rateLife expectancy at birthDoubling timeDoubling timeDependency ratio

Terms usedTerms used

FertilityFertilityMortalityMigrationMigrationAge structureHidden momentum of population growthHidden momentum of population growth

Population and economic growthPopulation and economic growth

Reduction in birthrates can raise per-capitaReduction in birthrates can raise per capita income in 2 wayslower dependency ratiop ylow consumption and high savingsShift of labor force investment from capitalShift of labor force investment from capital widening to capital deepening

Different issues related to development

Some important quality of life indicatorsSome important quality of life indicators related to population growth

Improvement of levels of living p gIncrease in the labor forcesHigher population growth rates and povertyg g yQuality of health care and education Relationship between poverty and family size

Population Growth, 1750-2200: World, Less D l d R i d M D l d R iDeveloped Regions, and More Developed Regions

Population Pyramids: Less Developed d M D l d C t i 1998and More Developed Countries; 1998

The Demographic TransitionThe Demographic Transition

Stage I: high birthrates and death ratesStage I: high birthrates and death ratesStage II: continued high birthrates, declining death ratesStage III: falling birthrates and death rates, eventually stabilizingy g

Dependency problemsDependency problems

Old age structures and young age structures g y g gboth create problems with supporting dependents; they are just different problems.

Young age structure requires expanding labor markets investments in educationmarkets, investments in education

Investments in older people less likely toInvestments in older people less likely to enhance productivity

The present demographic transition in d l i ideveloping countries

Stage II alread occ rred in most of theStage II already occurred in most of the developing world,but with higher birthrates than in the developed worldin the developed world.Stage III:

has been similar to developed countries forhas been similar to developed countries for some developing countries like Taiwan, South Korea, China,Chile, Costa Ricahas not occurred yet for other countries mainly in Sub-Saharan Africa and the middle east.

Rapid and Slow TransitionRapid and Slow Transition

Rapid transitionJapan

Slow TransitionPakistanJapan

South KoreaT i

PakistanIndiaBangladeshTaiwan

Singapore

BangladeshPhilippinesPapua NewThailand

Indonesia

Papua New Guinea

Miracles of rapid transition in East Asia

Rapid demographic change creates windows of opportunity for accelerated economic growth:

Rapid growth of labor forceSaving and investmentCh i l fChanging roles of womenHuman resource investment

Stage of Demographic Transition and population requirement

Population growth may be good at the beginningIn the middle factors like political stability, cultural resources, and economic efficiency

b h i t t th l timay be much more important than population growthR hi hi h i i l iReaching high income may require slowing growth

Fertility and income

Malthusian population model (1798)Malthusian population model (1798)

Population tends to grow at a geometric ratePopulation tends to grow at a geometric rate, doubling every 30 to 40 years Food supplies only expand at an arithmeticFood supplies only expand at an arithmetic rate due to diminishing returns to land (fixed factor)acto )Malthusian population trap: countries would be trapped in low per-capita incomes (per pp p p (pcapita food), and population would stabilize at a subsistence level.

Preventive and positive checksTechnological progress is not considered

Household theory of fertilityHousehold theory of fertility

Family size is a decision taken at the ymicroeconomic level by households based on a rational economic decision on “demand for children”childrenIncome effect: Higher income allows for larger family sizelarger family sizeSubstitution effect: Higher cost of children implies smaller family sizeOther theories

Why are there so many children in poor countries?

Because children are an “investment” rather than a “consumption good” the “expected return of the investment” is given by childreturn of the investment” is given by child labor and financial support for parents in old ageageParents have children up to the point at which their marginal economic benefit is equal totheir marginal economic benefit is equal to marginal cost

Hidden momentum of population growth

It is the tendency of population growth toIt is the tendency of population growth to continue, even after birthrates have decline substantially. y

Substantial changes in birthrates may take decadeswhen the young population is large, in the near future high-fertility population will be high even if fertility levels are lowerhigh,even if fertility levels are lower.

Policy approach to deal with the high l ti thpopulation growth

Decrease “marginal economic benefit ofDecrease marginal economic benefit of children”:Increase the minimum-age child laborgprovide better old-age social securityIncrease “marginal cost of children”Increase marginal cost of childrenIncrease education, employment and wages for womeno o e

Policy approachPolicy approach

Better water and public health programs inBetter water and public health programs in rural and urban poor areas to lower infant mortalityImplementation of family-planning programsImprovement of quality of care of health and p q yfamily planning programsMonetary subsidies to small familiesPolitical commitment and role of religious leaders