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1 Population Growth and Economic Development Copyright 2012 Pearson Addison-Wesley. All rights reserved. 1

2 Some Facts About World Population Total world population: 6.1 billion at beginning of 21st century About 75% of people live in developing countries About 60% of the population lives in Asia and Oceania About 40% of people live in only 15 countries World population estimated to reach 9.2 billion in 2050 and 11 billion by 2200 By 2200, over 90% of population will live in what today are developing countries 2

3 The Basic Issue: Population Growth and Six major issues: Quality of Life 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? 3

4 The Basic Issue: Population Growth and Quality of Life Six major issues (cont d): 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? To what extent are low levels of living an important factor in limiting freedom of parents to choose a desired family size? i.e. Is there a relationship between poverty and family size? To what extent does affluence in the developed world affect the ability of developing countries to accommodate (provide for) their growing populations? 4

5 Population Growth: Past, Present, and Future World population growth through history 0.002% annual growth since human existence on earth until about 300 years ago 0.3% per annum by 1750; growth rate had accelerated by 150 times by 1950 growth rate had tripled to about 1% growth rate continued to accelerate peaking at 2.35% around 1970 current growth rate around 1.3% per annum but Africa s rate of growth relatively higher at 2.4% per year 5

6 Estimated World Population Growth 6

7 World Population Growth,

8 Population Growth: Past, Present, and Future Structure of the world s population Geographic region Rate of population increase Birth rates, death rates, Total fertility rates Age Structure and dependency burdens 8

9 Geographic Region: World Population Distribution by Region, 2010 and

10 Geographic Region: The Population Map: World Map with Country Sizes Proportional to Population,

11 Population growth rates in developed and developing countries,

12 Fertility Rate for Selected Countries, 1970 and

13 Population Growth: Past, Present, and Future Population growth rate equals natural increase plus net international migration Natural increase is birth rate minus death rate Net international migration negligible Difference between developing and developed nations in terms of growth rate is higher difference in birth (fertility) rates than in death (mortality) rates Total fertility rates higher in Sub-Saharan Africa (5.6) than in Western Asia (3.7) 13

14 Population Growth: Past, Present, and Future The Hidden Momentum of Population Growth tendency for population growth to continue, even after birthrates have declined substantially High birth rates cannot be altered overnight substantial changes in birthrates may take decades Age structure of developing country populations youthful when the young population is large, in the near future high-fertility population will be high, even if fertility levels are lower or declining 14

15 Population Growth: Past, Present, and Future children aged under 15 more than 31% in developing countries but just 18% in developed nations 46% Ethiopia; 44% Nigeria; 41% Pakistan; 33% India as at 2002 results in high youth dependency ratio (under 15/economically active) Dependency problems Old age structures and young age structures both create problems with supporting dependents; they are just different problems. Young age structure requires expanding labor markets, investments in education, etc. Investments in older people less likely to enhance productivity 15

16 Population Pyramids: All Developed and Developing Countries and Case of Ethiopia 16

17 The Demographic Transition The transition from high birth and death to low birth and death rates as a country develops from a pre-industrial to an industrialized economic system Stage I: High birthrates and death rates Stage II: Continued high birthrates, declining death rates Stage III: Falling birthrates and death rates, eventually stabilizing at low growth rates 17

18 The Demographic Transition in Western Europe 18

19 The Demographic Transition The present demographic transition in developing countries Stage II already occurred in most of the developing world, but with higher birthrates than in the developed world. Stage III: has been similar to developed countries for some developing countries like Taiwan, South Korea, China,Chile, Costa Rica has not occurred yet for other countries mainly in Sub- Saharan Africa and the middle east. 19

20 The Demographic Transition in Developing Countries 20

21 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Thomas Malthus 1798 Relationship between population growth and economic development Population tends to grow at a geometric rate, doubling every 30 to 40 years Food supplies only expand at an arithmetic rate due to diminishing returns to land (fixed factor) Hence, fall in per capita food production (or per capita incomes) to subsistence levels leading to chronic low levels of living (absolute poverty) Preventive and positive checks Need for moral restraint and limits to number of children else positive checks; hunger, disease and war 21

22 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models The Malthusian Population Trap The idea that rising population and diminishing returns to fixed factors result in low levels of living (population trap) Countries would be trapped in low per-capita incomes (per capita food). 22

23 The Malthusian Population Trap 23

24 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Criticisms of the Malthusian Model Impact of technological progress not considered can offset growth-inhibiting forces of rapid population increase Assumes that national rates of population increase are directly related to per capita income There appears to be no clear correlation between population growth and levels of per capita income in the data Microeconomics of family size; individual and not aggregate variable (per capita income) as principal determinant of family size decision making 24

25 How Technological and Social Progress Allows Nations to Avoid the Population Trap 25

26 Fertility in Relation to Income in Developing Countries Birthrates seem to show no rigid relationship with per capita income levels 26

27 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models The Microeconomic Household Theory of Fertility Family size is a decision taken at the microeconomic level by households based on a rational economic decision on demand for children Income effect: higher income allows for larger family size Substitution effect: higher cost of children implies smaller family size 27

28 Microeconomic Theory of Fertility: An Illustration 28

29 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Demand for Children Equation C d f ( Y, Pc, Px, tx), x 1,..., n Where C d is the demand for surviving children Y is the level of household income P c is the net price of children P x is price of all other goods t x is the tastes for goods relative to children 29

30 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Demand for Children Equation Cd f ( Y, Pc, Px, tx), x 1,..., n Under neoclassical conditions, we would expect: Y Cd 0 C P d x 0 C P d c 0 C t x d 0 30

31 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models The Demand for Children in Developing Countries In many developing countries, there s strong intrinsic psychological and cultural determinant of family size First two or three children as consumer goods Additional children as investment goods : Work on family farm, microenterprise Old age security motivation For additional children parents assumed to weigh private economic benefits against private costs 31

32 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models Some empirical evidence Strong statistical support for economic theory of fertility High female employment opportunities outside home and higher female school attendance associated with lower fertility Implications. Fertility lower if Raise women s education, role, and status More female nonagricultural wage employment Rise in family income levels Reduction in infant mortality Development of old-age and social security Expanded schooling opportunities 32

33 The Consequences of High Fertility: Some Conflicting Perspectives Is population a serious problem in developing countries? Two opposing views Population growth is Not a Real Problem Population Growth Is a Real Problem 33

34 The Consequences of High Fertility: Some Conflicting Perspectives (cont d) Population growth is Not a Real Problem : The real problem is not population growth but the following, Underdevelopment World resource depletion and environmental destruction less than ¼ of world population consume more than 80% of world s resources Population Distribution Subordination of women Overpopulation is a Deliberately Contrived False Issue Created by dominant rich-country agencies and institutions to keep LDCs in underdeveloped, dependent condition Population Growth is a Desirable Phenomenon Consumer demand; economies of scale; sufficient low-cost labor supply; noneconomic reasons (under-populated rural regions, plenty arable land, ethnic minorities, etc.) 34

35 The Consequences of High Fertility: Some Conflicting Perspectives (cont d) Population Growth Is a Real Problem Extremist arguments Population and global crisis; attributes all the world s economic and social evils to excessive population growth Theoretical arguments Growth theories (Harrod-Domar and Solow models) Empirical arguments Lower economic growth Poverty and inequality Adverse impact on education Adverse impact on health (of women) Food issues; feeding the world s expanding population Impact on the environment Frictions over international migration 35

36 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 factor Problem is not simply numbers but quality of life and material wellbeing Population growth does serve to intensify problems of underdevelopment and makes prospects for development more remote Voluntary decreases in fertility is generally desirable for most developing countries with still-expanding populations 36

37 Goals and Objectives: Toward a Consensus Policy goals and objectives to population growth in developing countries must be realistic Where population growth is a problem, deal not only with population variable but also underlying social and economic conditions of underdevelopment Smaller families through development-induced motivations Family planning programs should provide both education and technological means to regulate fertility Developed countries should assist developing countries 37

38 Some Policy Approaches What Developing Countries Can Do Persuasion through education Family planning programs Address incentives and disincentives for having children through the principal variables influencing the demand for children Raise the socioeconomic status of women Increase employment opportunities for women (increases opportunity cost of having more children, as in microeconomic household theory) 38

39 Some Policy Approaches What the Developed Countries Can Do Generally Address resources use inequities More open migration policies How Developed Countries Can Help Developing Countries with Their Population Programs Research into technology of fertility control Financial assistance for family planning programs 39

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