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Chapter 6

Population Growth and Economic Development: Causes, Consequences, and Controversies

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Population growth and Standard of living

Six major issues:

– Impact of population growth and standard of living.

– Population growth on employment (GDP per capita).

– Population growth rates affect poverty.

– Population growth and Health care.

– Population growth and education.

– Relationship between poverty and family size.

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Population growth and economic development, consequences, controversies

• Historical and recent population trends.

• Structure of world population by regions.

• Fertility and mortality rates.

• Demographic transition.

• Malthusian population trap.

6-4

Estimated World population growth

6-5

Historical Population Trends

Growth rate of World population has increased after 1950: • Falling mortality rates (resulting from rapid technological advances in modern medicine and spread of modern sanitation methods) raised population growth rates.

• Malnutrition – Health conditions decline in mortality rates.

Via access to modern medicine. Proliferation of public health facilities. Clean water supplies. Improved nutrition. Public education.

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World population growth (1750-2050)

6-7

Structure of the world’s population

By geographic region:

Africa: >100 percent increase through the year 2050.Latin America: >50 percent.

Asia: >50 percent.Europe: >5 percent

North America: 50 percent

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Figure 6.2: World population distribution by region (2003 and 2050)

6-9

Structure of the world’s population

By birth and death rates:

• Population increase = (measuring the excess of births over deaths) + (measuring immigrants in excess of emigrants).

• Data show net international migration is limited in magnitude.

• Faster population growth in developing world.

Birth rates (Less developed) >>> Birth rates (Developed).Death rates (Less developed) > Death rates (Developed).

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Fertility rate for selected countries

6-11

Population pyramids: Age structures 2005

6-12

The Demographic Transition

Process through which fertility rates eventually fall to replacement levels.

Stage I:High birth rates and high death rates (slow growing population).

Stage II:Continued high birth rates but declining death rates (beginning of

demographic transition.

Stage III: Falling birth rates (population growth is stabilized).

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Figure 6.6: The traditional demographic transition.

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Figure 6.7: The demographic transition in developing countries

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High fertility in developing countries

Malthusian Population Trap postulates that:

• Food supplies expand only at arithmetic rates due to diminishing returns to the fixed factor land. Population increase geometrically.

• Growth in food supplies can’t keep pace with expanding population

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Critical Assumption (Malthusian Population Trap): – The higher the level of per capita income the faster the growth in aggregate income.

Rationale:– Countries with higher per capita incomes generate higher savings therefore more investment that leads to faster capital accumulation and growth.

Result:– In the absence of preventive checks (birth control), positive checks (starvation, disease) provides the restraining force on population growth

High fertility in developing countries

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Main Criticism of the Malthusian model:

Ignores the impact of technological progress.

Rapid technological improvement increasing returns to scale rather than decreasing returns to scale (help raise significantly the productivity of the fixed factor land.

The causes of high fertility in developing countries.

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How technological and social progress allows nations to avoid the population trap

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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”.

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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

The causes of high fertility in developing countries: The Malthusian and household models.

Demand for Children Equation

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Under neoclassical conditions, we would expect:

Demand for Children Equation

The causes of high fertility in developing countries: The Malthusian and household models

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Some empirical evidence: Implications for development and fertility

– Women’s Education, role , and status.– Female nonagricultural wage employment.– Rise in family income levels.– Reduction in infant mortality.– Development of old-age and social security.– Expanded schooling opportunities.

The causes of high fertility in developing countries: The Malthusian and household models

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The consequences of high fertility:

Classical Conclusion:• Rapid population growth (RPG) lead to serious development problems.

Two opposing views on the impact of RPG: 1. Not a real problem.2. Real problem.

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It’s not a real problem

The real problem is not RPG but the following issues:

Underdevelopment:

• Development should be the goal because it will generate economic progress and other social mechanisms that will automatically regulate population growth.

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The real problem is not RPG but the following issues:

Population Distribution:

• Main problem is the spatial distribution of population.• Governments should reduce rural-urban migration to bring about a more efficient population distribution in terms of available productive resources.

Subordination of Women:

• Population growth is a natural outcome of women’s lack of economic opportunity.• Education and empowerment of women (Bank of the poor).

It’s not a real problem

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It’s a deliberately contrived false issue:• Population growth is an issue intentionally created by dominant rich country agencies and institutions to keep less developed in their under developed status.

It’s a desirable phenomenon:• Population growth is an essential ingredient to stimulate economic growth:

Consumer demand to reach the economies of scale in production to lower unit production costs.

It’s not a real problem

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• Unrestrained population growth is the principal cause of poverty,

low levels of living, malnutrition, poor health conditions, environmental degradation, etc.

• Population stabilization is the most immediate task even if it requires severe and coercive measures imposed on LDCs.

It’s a real problem

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Theoretical argument (Population-poverty cycle theory):

• Population growth delays the economic growth process by:

Reduced private savings at the household level.

Reduced public savings due to increased government spending on basic services to the additional people.

• Lower aggregate savings will slow down the capital accumulation resulting in low levels of investment and slower economic growth.

It’s a real problem

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Empirical argument:

Recent research document the negative consequences of RPG on:

• Economic growth (RPG lowers per capita income growth in LDCs).

• Poverty and inequality (consequences fall heavily on the poor).

• Food (given RPG trends, feeding everybody gets more difficult).

• Environment (RPG leads to faster environmental degradation).

It’s a real problem

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Three policy goals to deal with problems associated with RPG:

• Policies should target not only the population variable but also the underlying social and economic conditions of underdevelopment.

– absolute poverty, widespread unemployment, malnutrition, etc.

• Family planning programs should provide education and technological means to regulate fertility.

Goals and objectives: toward a consensus

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Some Policy Approaches

What developing countries can do:

– Persuasion through education.

– Financial assistance for family planning programs.

– Manipulate incentives and disincentives for having children.

– Raise the socioeconomic status of women.

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Table 6.4: Countries adopting family- planning programs (1960-1990)