Towards the Goldilocks Period: Accelerating the Demographic Transition in the Philippines

1. Towards the Goldilocks Period:Accelerating the Demographic Transition in the Philippines Dennis S. Mapa (UP School of Statistics and UP School of Economics) Arsenio M. Balisacan (National Economic and Development Authority and UP School of Economics) Sharon Piza (Asia-Pacific Policy Center) and Jose Rowell Corpuz (Asia-Pacific Policy Center) 50thAnnual Meeting of the Philippine Economic Society (PES) 27 November 2012 Philippine Economic Society Annual Meeting

2. The Goldilocks Period: Demographic Transition and Demographic Dividend • The idea behind the population-and-development orthodoxy is the demographic transition. • As countries move from large families (high fertility rate) into small families (low fertility rate), they pass through what is called a Goldilocks period – described asa generation or two in which fertility rate is neither too high nor too low. • The fall to replacement fertility is a unique and precious opportunity for higher economic growth – demographic gift or dividend. Philippine Economic Society Annual Meeting

3. Demographic Factors and Economic Growth • First dividend – demographic transition results in higher per capita income (Bloom and Willianson (1997), Mason and Lee; (2006), Mapa and Balisacan (2004), Mapa, Balicasan and Briones (2006, 2008)). • Second dividend - individuals accumulate saving in their working years to serve as buffer during their retirement years; when society increases its saving rate this results to a more rapid economic growth, creating the second demographic dividend (Mason; (2007), Mapa and Bersales (2008)). • The Philippines has not fully benefited from the two demographic dividends due to its rapid population growth. Philippine Economic Society Annual Meeting

4. How to harvest the demographic dividend? • Advocates of speeding the demographic transition placed emphasis on the need of public efforts to speed up the voluntary reduction in fertility rates as rapidly as possible. • Sachs (2008) pointed out that “demographic transitions, where they have occurred, have typically been accelerated and even triggered, by proactive government policies.” • There is a need to influence public policies that play an important role in assisting, particularly the poor households, the achievement of voluntary reduction of fertility rates. Philippine Economic Society Annual Meeting

5. Policy Lessons from the East Asia Demographic Transition • McNicoll (2006) identified some key policy lessons of the demographic transition that played a crucial role in the “East Asian Economic Miracle” (countries studied: China, Indonesia, Malaysia, South Korea, Taiwan, Thailand and Vietnam) • Three relevant government actions/policies that had major influences in accelerating the demographic transition: health services, family planning and education (particularly the secondary education). • In addition, the rising female age of marriage as a major factor in reducing the fertility rate in the East Asian region. Philippine Economic Society Annual Meeting

6. Poor countries are racing through the Demographic Transition as rich ones Philippine Economic Society Annual Meeting

7. Fertility Rate by Wealth Quintile Philippine Economic Society Annual Meeting

8. Simulating Total Fertility Rates under Two (2) Scenarios Philippine Economic Society Annual Meeting

9. Relationship between TFR and Regional Per Capita GDP (1993 to 2006) Philippine Economic Society Annual Meeting

10. Determinants of TFR (Regional Data) + other control variables not shown; *significant at 10%; ** significant at 5%; ***significant at 1% Philippine Economic Society Annual Meeting

11. Simulation of TFR under 2 Scenarios • Scenario 1 • business as usual • average per capita income growth of 2 percent per year (average GDP of 4 percent per year) • Scenario 2 • with government intervention to relieve pressure of unwanted fertility • 90 percent coverage on unwanted fertility • average per capita income of 2 percent per year (average GDP growth of 4 percent per year) Philippine Economic Society Annual Meeting

12. Total Fertility Rates under 2 Scenarios Philippine Economic Society Annual Meeting

13. TFR of the Bottom Quintile under 2 Scenarios Philippine Economic Society Annual Meeting

14. Simulation of TFR under 2 Scenarios • Using the 2008 TFR of 3.3 as base value, in the business as usual scenario 1, the Goldilock period will be reached by 2030, or twenty years from now. • In the second scenario where government intervention targets only households with unwanted fertility, the Goldilock period will be achieved 10 years early or in about 2020. Philippine Economic Society Annual Meeting

15. Alternative Drivers in Reducing Fertility Rates Philippine Economic Society Annual Meeting

16. Econometric Model • Econometric model is constructed to quantify the impact of women’s education, health services, family planning (using contraceptive prevalence rate) and labor force participation of women on total fertility rate (proxy by the total children ever born (TCEB) to a woman aged between 15 to 49 years old). • The panel data is for the period 1998, 2003 and 2008 and coincides with the National Demographic and Health Survey (NDHS) conducted by the National Statistics Office (NSO) every five (5) years. • The resulting provincial panel data has 73 cross sectional units (provinces) and 3 time periods (1998, 2003 and 2008), for a total of 219 observations. Philippine Economic Society Annual Meeting

17. Direct Effect Fertility Rate Income Growth “Expansion of the pie” Poverty Reduction Reverse Causality GROWTH CHANNEL Model 2 Model 1 Interaction Effects with Income Growth “Division of the pie” REDISTRIBUTION CHANNEL Direct Effect Determinants of Growth Economic climate Inequality Initial Conditions Institutions Neighborhood/Spatial effects Fertility-Related Determinants of Growth Investment in Education Investment in Health Labor Force Participation of Women Framework of the Econometric Models Philippine Economic Society Annual Meeting

18. Econometric Model for Total Children Ever Born (TCEB); Panel Estimation using Fixed Effects (FE) Model ***, **, * significant at 1 percent (two-sided), 5 percent (two-sided), and 10 percent (one-sided) levels, respectively Philippine Economic Society Annual Meeting

19. Econometric Model for Total Children Ever Born (TCEB); Panel Estimation using Fixed Effects (FE) Model ***, **, * significant at 1 percent (two-sided), 5 percent (two-sided), and 10 percent (one-sided) levels, respectively Philippine Economic Society Annual Meeting

20. Highlights • The empirical analysis identifies four areas that can reduce fertility rate. • Two very strong factors that influence reduction in the TFR are increasing the education level of women and increasing access to contraceptive use. • Moreover, improving health services through lowering of the under-5 year mortality rate and increasing employment opportunities of women have modest effects in reducing the TFR. Philippine Economic Society Annual Meeting

21. Highlights • A very promising policy handle in reducing fertility rate is in improving the level of women’s education. • The result of the study shows that increasing the average years of schooling of women by one year will decrease fertility rate by about 0.220, all things being the same. • Since education is also a positive determinant of income growth, this policy handle will also enhance the country’s prospect to move to a higher path of sustained per-capita income growth. Philippine Economic Society Annual Meeting

22. Highlights • An alternative is lowering fertility through the implementation of the provisions of the RH Bill (making contraceptives accessible, particularly to poor households) where the estimated TFR of 2.1 will be reached in about 12 years. • This estimate was arrived at on the assumption that CPR will increase to 70 percent in the next five years and 80 percent in the next 10 years (with the contraceptive use biased towards the modern method). • This will bring the CPR of the country near the average of the countries in the East Asia and the Pacific where CPR is about 77 percent in 2005 to 2009 (United Nations estimates). Vietnam and Thailand CPRs are 80 percent and 77 percent, respectively, in 2005-2009. Philippine Economic Society Annual Meeting

23. Top 30 Provinces ( Red color ) with high percentage of young dependents (at least 40%). • 30 out of 81 provinces • population of 22.6 million, representing 30% of the total Bicol Region Eastern Visayas Mindanao Philippine Economic Society Annual Meeting

24. Percentage of Young Dependents and Poverty Incidence Philippine Economic Society Annual Meeting

25. Thank you and good afternoon! Philippine Economic Society Annual Meeting