econ 355w - a. karaivanov lecture notes on population and ...akaraiva/week7 slides.pdf · econ 355w...

Econ 355W - A. Karaivanov Lecture Notes on Population and Growth

Week 7 notes (TS ch. 6) — Population Growth and Development(rough notes, use only as guidance)

• world population estimate 2010: 6.9 bln; projected at 9.2 bln in 2050

• overwhelming majority will be in the developing world

• should we worry? Or is this a fallacy.

• after all, the world population grew very little up until 1800 (wheneconomic growth was low) and then ‘exploded’ but at the same time theworld kept getting richer on average

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1. The basic issue: population growth and the quality of life

• each year about 75 mln people added to the world population; 97% indeveloping countries

• Some questions and worries from the l-re:

• does high population growth make it harder to provide social services;transportation, sanitation, etc.

• population growth = increase in the labor force — employment?

• world food supply?

• relationship between poverty and family size

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2. The facts

• very slow growth in population early on in history: 10,000 BC = 5 mln;1750 = 728 mln (0.04% growth per year)

• then ‘explosion’ — see tables 6.1/6.2 and fig. 6.1; ‘hockey stick’ graph

• now rate of population increase is slowing

• why the big change: (Gapminder)

— decline in mortality (medicine, sanitation)— decline in fertility — richer people choose to have less children

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Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 6-5

Table 6.1 Estimated World Population Growth


Figure 6.1 World Population Growth, 1750-2050


Table 6.2 World Population Growth Rates and Doubling Times


3. Structure of the world population

3.1 by geographic region

• more than 34 live in developing countries

• Africa will grow the most till 1950 (184%)

• Africa, LA, Asia = 88% of world population in 2050 (70% in 1970)

• figure 6.3: each box is 1 mln people; notice the huge India; tiny Canada/Russia

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Figure 6.2 World Population Distribution by Region, 2003 and 2050


Figure 6.3 The Population Map


3.2. fertility and mortality

• population increases due to natural increase (births and deaths) and netmigration

• birth rates in HICs are much lower than in LDCs (<15 per 1000 vs. upto 40)

• decline in fertility rates in some countries (Table 6.3)

• TFR remains very high in some countries (Gapminder); 5.5 in SSA

• rapid narrowing of the gap in mortality rates between HICs and LDCs(vaccination; sanitation); past 30 yrs reduced mortality rates in parts ofAsia and LA by 30-50%

• still — big differences in life expectancy at birth remain (SSA has lowestat 48 yrs) — AIDS, high under-5 mortality

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Table 6.3 Fertility Rate for Selected Countries, 1970 and 2006


3.3. Age structure and dependency ratios

• very young population in developing world (29% of population is under15 in LDCs; 35% excluding China) vs. 17% in HICs.

• thus — high youth dependency ratio = (people under 15) / (totalpopulation) in LDCs — workforce must support twice as many children inLDC vs HICs

• however, old age dependency ratio = (people over 65) / (totalpopulation) is much higher in HICs (e.g., only 3% in SSA)

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4. The momentum of population growth

• its tendency to continue even after birth rates have declined substantially

• Why? The age structure (fig. 6.4): if many young people born in thepast, even if they only have 2 children each, population will still grow alot (the ‘baby boom’ generation is similar); time needed for this effect towork itself out through the population pyramid

• Figure 6.5 shows examples of how long would it take if a country reachesreplacement fertility for its population to actually stabilize

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Figure 6.4 Population Pyramids: Ethiopia and the United States, 2005


Figure 6.5 The Hidden Momentum of Population Growth


5. The demographic transition (fig. 6.6)

• the process by which fertility rates eventually decline to replacementlevels (or below?) — observed in past 200 yrs or so, as countries developeconomically

• three stages:

— 1. slow growing population for centuries (high birth rates and highdeath rates)

— 2. modernization (medicine advances, sanitation, nutrition) — 1850-1890 for leading HICs; birth rates stay high but death rates decline;DT begins here!

— 3. further modernization: death rates decline even more; birth ratealso starts falling rapidly

• why does the death rate pick up at the end? Older populations. . .

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Figure 6.6 The Demographic Transition in Western Europe


Figure 6.7 The Demographic Transition in Developing Countries


• Figure 6.7 for developing countries: things happened much later, andwith much more variety in outcomes

• birth rates higher than in pre-industrial Europe (women marry younger)

• case A: Taiwan; China; S. Korea, Chile, etc. — rapid fall in populationgrowth

• case B: death rates stay high (poverty, AIDS) — SSA, some middle-East

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THEORY

I. The Malthusian model (the ‘population trap’), 1798; figure 6.8

• assumption 1: if unconstrained population grows at a (geometric) ratedoubling every 30-40 yrs (e.g., as in 1, 2, 4, 8, . . . )

• assumption 2: due to diminishing returns on land; food expands atarithmetic rate (e.g. constant amount added per year as in 1, 2, 3, 4,. . . )

• because of the above: income per capita would fall to lead to a stablepopulation existing barely at the subsistence minimum

• Malthus’ conclusion: if want to avoid absolute poverty, need to engagein ‘moral restraint’ and limit the number of children (does this remindyou of something?)

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Figure 6.8 The Malthusian Population Trap


• point A on fig. 6.8 is the Malthusian trap — it is a stable equilibrium;above point A population growth outpaces the income growth rate andwe return back to point A.

• only way to go past point A is control the population growth rate (andthen you can go to e.g. point C);

• Malthus: talked about starvation, disease, wars as natural (positive)checks on population growth

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Criticisms:

1. Technological progress — Malthus was living in the ‘wrong time’, beforetechnological progress really took off

LDMR may hold as in the Solow model Y = Akα but Malthus did notexpect that A can grow too (can get more output from the same amount ofinputs — land, labor, capital by using them in a more efficient way! Figure6.9.

2. the assumption that rates of population increase are positively related toincome per capita; research shows that among LDCs this correlation is veryweak or does not exist (death rates fallen across the board; fertility ratesmay differ a lot for given GDP p.c. level — see Gapminder)

3. per capita GDP may not be the principal determinant of populationgrowth rates (inequality, household incomes, other circumstances mattermuch more)

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Figure 6.9 How Technological and Social Progress Allows Nations to Avoid the Population Trap


II. Modern microeconomic theory of fertility

• not mechanistic as Malthus but looking at fertility as a rational decisionmade by parents to maximize ‘utility from children’ (depending on thebenefits vs. costs)

• children as a ‘consumption’ good (in LDC also as ‘investment’ — labor;insurance when old)

• demand for children a f-n of: (sign of effect in brackets)

— household income, Y (unclear: on one hand maybe children are anormal good; but to earn higher income means higher opportunitycost of time — less demand for children who are time-consuming)

— net price of children Pc (difference between benefits and costs)(negative)

— prices of all other goods, Px (positive)— ‘tastes’ for other goods relative to children (negative)

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— the mortality rate (positive)

• e.g. increase in female employment opportunities increases the ‘cost’ ofchildren

• demand for children in developing countries (or historically) also viewedas ‘investment’ — provide extra family labor (earnings); take care of youat old age (no gov’t pensions, etc.)

• prediction: higher employment opportunities for women; gov’t socialpensions; urbanization — will reduce demand for children (costs increase,benefits fall)

• thus, raising the ‘price’ for children (e.g. providing women with accessto education, jobs) will reduce birth rates

• The quality-quantity trade-off

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• Nobel winner G. Becker postulated the idea that with increase in incomeand falling mortality risk parents prefer to have less higher quality (bettereducated, richer) children as opposed to higher quantity (which is moreuseful at low incomes; high mortality rates)

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6. Empirical evidence:

• shows that education/ job opportunities for women associated with lesschildren as the theory predicts

• better public health associated with less children too

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7. Conclusions

• the following factors lead to decreased birth rates:

1. increase in the education of women

2. increase in female non-agriculture wage employment opportunities

3. rise in family income

4. reduction in infant mortality

5. development of old-age and social security safety nets

6. expanded schooling opportunities (to exploit the quality-quantitytrade-off)

• of course, information about birth control practices would help too

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IS POPULATION GROWTH GOOD OR BAD?

1. Population growth as a problem?

• a mechanical view: if Y is fixed, less N makes Y/N higher. . .

• as if population growth is something exogenous that just happens,without voluntary choice

• dire predictions about running out of food, apocalyptic scenarios (P.Ehrlich, etc. — see Easterly’s chapter 5).

• the basic Malthusian argument: higher population growth leads everyoneto misery. . .

• poverty causes large families causes poverty. . .

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• unemployment will soar, no jobs for all these people (the ‘lump of labor’fallacy again. . . ); assumes each additional person has zero productivity!Ridiculous.

• call for ‘family planning programs’ — extreme constraints on people’sliberty and choice (e.g. the one-child policy in China)

• it is true that under absence of technological progress, LDMR will makeY/N decline as N grows. But why should this be the case?

• Dubious empirical support on any of these propositions: correlationbetween population size and income per capita is not negative(Gapminder)

• also, the richer a country gets, the lower population growth

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2. Not a problem!

• high population growth is a symptom of poverty, not a cause! Otherissues (this course goes over many) are the cause. Once the latter areremoved, the country grows and population growth falls.

• ‘conspiracy theories’ — population control deliberately pushed by HICs —no, I don’t think so

• population growth as desirable phenomenon:

— people needed to work — younger populations have higher workforce(India vs. China in next 20-30 years)

— old-age dependency ratios and the associated health and pension billsmay be a much bigger problem (as some HICs start to realize)

— prices will adjust to any population pressures (e.g. food scarcity) andthis will restore equilibrium (increase costs of children)

— studies show only 10-20% of arable land used in SSA, LA — so this isnot an issue

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— technology will resolve any problems, if any (e.g. there will bebig incentives to find alternative food sources if suddenly thisbecomes a problem); population growth putting stress on resourcesfacilitates/spurs innovations that make us save those resources!

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POLICY

• Table 6.4 shows a lot of countries adopted family-control policies

• range from providing incentives to have less children to outright coercion(China, India)

• examples in Singapore (first promoted less children, now more)

• issues: think of the dependency burden down the line; China’s preferencefor boys — sex ratio imbalance becomes even stronger; TFR in China nowat 1.6 (population still grows but only because of momentum).

• increasing education and employment opportunities for women

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Table 6.4 Countries Adopting Family-Planning Programs, 1960-1990


EASTERLY: “development is the best contraceptive”

• show Gapminder on Thailand, India, etc. in 80s onwards

1. the ‘cash for condoms’ panacea

• Paul Ehrlich’s book The Population Bomb (1968) predicted faminesswiping Africa, LA, Asia wiping 1/5 of the population

— 1960s — 1 of 10 countries was having a famine at least once perdecade; in 1990 — only one of 200 countries had a famine

— global population doubled 1960-1998 but food production tripled!— food prices have fallen by 50% (in real terms) over past 2 decades— based on a false premise — the 150 mln people who have unmet needfor contraception would stop having babies as soon as condoms wereavailable

— an unwanted child is far more expensive than a condom— Pritchett- number of desired children per woman basically equals theactual number of children

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2. the data:

• the negative views on population growth suggest that countries that havehigher pop. growth should have low or negative GDP growth per capita

• easily testable, result: no evidence that population growth affects percapita growth (fig. 5.1)

• historically — population growth and GDP growth accelerated jointly afterthe Industrial revolution, then fell jointly — definitely no negative effecthere too.

• changes in population growth too small relative to changes in GDP p.c.growth

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3. externalities?

• a possible argument against population growth is that families do nottake into account the negative externalities they impose on others whendeciding how many children to have — e.g. environment, crowding thecities, etc.

• *BUT, there are also positive externalities associated with more people:more taxpayers, more potential “geniuses”; only higher population densitymake some things possible (e.g. transition to agriculture; internet?)

• overall: subsidizing condoms is not the way to go (very small factor)

• should countries pursue population policies? Unclear — many possiblebenefits for each possible cost.

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Suppose however a country wants to reduce population growth for whateverreason — what is the best policy?

• Answer: DEVELOPMENT!

• parents in richer countries have less children — Becker: the increase inopportunity cost of time which high wages bring lead to less children

• Lucas: extensive vs. intensive growth; at first income and populationgrew at the same time (more output created by more people). Butgradually, by LDMR, pushing technology makes investment in humancapital more profitable than investing in extra worker — “intensive growth”starts with each (more skilled) worker producing more.

• the lesson — give incentives to invest in (more skilled) people — e.g.the conditional transfer policies in Mexico, Brazil where money is givento mothers conditional on keeping children in school (addresses bothempowering women and education)

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econ 355w - a. karaivanov lecture notes on population and ...akaraiva/week7 slides.pdf · econ 355w...

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