Chapter 8

1. Chapter 8 Population

2. Population Growth • World population has followed an ‘S’ shaped pattern of growth over time • In antiquity, growth was very slow • In the 18th and 19th century population, growth accelerated as a result of advances in medicine

3. Population Growth • Population growth slowed in industrial countries in the 20th century • Hopefully, a similar pattern will be observed in developing countries • If it does then, world population will peak at around 12 billion by the end of this century

4. Population Growth:Some Basic Concepts • Birth (death) rates refer to number of births (deaths) per thousand people per year • The population growth rate is obtained by subtracting the death rate from the birth rate • It could be 18 per thousand, for example, or 1.8 percent per year • Sometimes birth and death rates are referred to as “crude” rates

5. Population Growth:Some Basic Concepts • Among Asian economies, Pakistan, Malaysia and the Philippines stand out as having the highest population growth rates in 2001 (see Table 8.1) • Japan, Hong Kong, PRC, Thailand and Singapore are the countries with the lowest population growth rates – around 1 percent per year or less

6. Table 8.1

7. Population Growth:Some Basic Concepts • Age distributions show what proportion of the population is in certain age categories • Asia and Latin America have very similar age distributions. Europe and North America also have similar age distributions • In Asia and Latin America, proportion under 15 is about one third of the population. This group is much smaller in Europe and North America – around one fifth

8. Population Distribution:Some Basic Concepts • Life expectancy is calculated as the number of years a child born in a particular year is expected to live • Total fertility and population growth rates are positively correlated • Life expectancy and fertility are generally inversely related • Infant mortality is another demographic measure and reflects general health of the population (see Table 8.3)

9. Table 8.3

10. Population Growth & Economic Development • Complex interrelationship between economic growth and population growth • Generally, very rich countries have low rates of population growth and aging populations while poorer countries have younger populations • The size of the working population as a percent of the total will depend upon the numbers in the under 15 and over 60 group

11. Population Growth & Economic Development • The relationship between the dependency rate (number working relative to those not working) and income is not clear • It will depend upon the age distribution and also upon labor force participation rates of women as well as men • Other things being equal, a more rapidly growing population should retard growth according to the theories we studied in Chapter 2

12. Theory of Demographic Transition • Stage 1: High birth and death rates • Stage 2: High birth rates and falling death rates • Stage 3: Low birth and death rates • Thus, population growth is high in the second stage, and lower in the first and third stages

13. Theory of Demographic Transition • The demographic transition was slow – sometimes many years in the now industrialized countries • It has been faster in recent years in developing countries • Nevertheless, the second stage of the demographic transition is responsible for the dramatic increase in world population in the last two hundred years

14. Theory of Demographic Transition • Several reasons for the slow demographic transition: • Slow response of birth rates to changes in death rates • Slow changes in social norms, particularly in traditional societies • Inertia from movement from triangular distribution of population to a more rectangular distribution of population

15. Population Growth:Impact on Economic Development • The general growth theories we have reviewed earlier suggest that high population growth (HPG) will have a negative impact on the rate of growth in per capita income • There may also be negative effects on saving and investment from HPG • What does the empirical evidence tell us about HPG effect?

16. Population Growth:Impact on Economic Development • No detrimental effect on saving and investment • Common property renewable resources will be negatively effected by HPG • Nonrenewable resources prices will rise and will therefore be used less intensively • HPG has a detrimental effect on health and education but be careful about policy that flows from that • HPG may exacerbate income inequality to the extent that the poor have larger families

17. Economics of Fertility • In a traditional supply-demand framework, the decision to have a child is treated like the decision to purchase any good • The demand curve is downward sloping and the marginal cost curve is the supply curve • Shifts in the two curves will result in shifts in the number of children. • Trade off between children and other goods in a consumer choice model

18. Economics of Fertility • Within this standard demand model, the demand for children will increase as income increases and fall if the cost of children goes up relative to other goods • The demand for children will also be inversely related to the opportunity cost of having children which in this case is the income foregone by the prospective mother

19. Economics of Fertility • In poorer countries, the opportunity costs are low and the benefits higher since, after reaching a certain age, children can work on the farm • In richer countries, the anticipated cost of having children is higher since more education is the norm and children may never contribute to household income

20. Economics of Fertility • Furthermore, housing costs may be greater in urban areas and in industrial countries • As mentioned above, benefits may be higher in poor countries because of the opportunity to work at a young age

21. Economics of Fertility • There are also other benefits in a rural setting such as being support for the parents in old age • This is a powerful incentive to have enough children to provide such support since there is no social security system • Because of its direct impact on opportunity cost, women’s education may be a powerful force for lower fertility

22. Economics of Fertility • In an expanded Becker type model, quantity and quality (more education) of children are determined together • This means that if quality is a superior good, as income rises, there would be a substitution away from more children who are less educated toward fewer children with greater education

23. Economics of Fertility: Empirical Results • Micro-studies show that female education beyond four years of elementary education have a strong negative effect on fertility • Studies also show that when the labor force participation rate of women goes up fertility falls • When the difference between child wages and mother’s wages goes up, fertility falls

24. Economics of Fertility: Empirical Results • Substitution effect between quality and quantity of children so that the cost of education has an important indirect effect on fertility • Lower costs of education means lower fertility because of the substitution effect of quality for quantity

25. Economics of Fertility: Empirical Results • A decline in infant mortality results in a decline in fertility. There is less need for “insurance births” to provide old age support to parents where there is no social insurance system • The demand for “insurance births” will also depend upon the risk behavior of parents – those who are risk averse will “hoard” children to protect against infant mortality

26. Economics of Fertility: Empirical Results • The empirical evidence suggests that families do not completely replace a lost child • This would tend to mute the correlation between fertility and infant mortality

27. The Asian Experience • By the 1990s, many countries in East Asia and elsewhere had completed the demographic transition • Early in the postwar era, population growth in the NIEs and PRC was much higher than in South Asia and at its peak was also much higher than the growth rate of population in South Asia today

28. The Asian Experience • Beginning in the mid-1960s, population growth in the NIEs began to fall dramatically at the same time that economic growth was accelerating • This was primarily due to a rapid decline in birth rates in the NIEs and in Thailand

29. The Asian Experience • In South Asia, neither birth nor death rates changes much until the 1980s when the birth rate began to decline • The classification of Asian economies into different categories depending on fertility and infant mortality shows that the two are strongly related in an inverse manner

30. The Asian Experience • The NIEs and Sri Lanka had the lowest combination while many countries had high infant mortality and high total fertility rates (see Table 8.6) • Despite this relationship, some countries such as Sri Lanka, Indonesia, PRC, Thailand and some states of India were able to lower population growth even while per capita incomes were low

31. Table 8.6

32. Policies to Reduce Population Growth • They were able to do this because of strong government policies to lower fertility and infant mortality • These included family planning and the use of contraceptives • Budget allocations for family planning differed among countries

33. Policies to Reduce Population Growth • Thailand, Malaysia and Sri Lanka devoted most resources to contraceptive use – supplying information and subsidizing the cost • Other countries, such as India and PRC, used incentive payments • In the Philippines, religious beliefs have constrained the use of contraceptives • As a result, population growth may have remained rapid

34. Policies to Reduce Population Growth • Women’s education has also played an important role in lowering fertility • Coercion has been used in India and PRC

35. Prospects for the Future • The “demographic divide” is a term coined to describe the demographic transition when the working population is growing faster than the child and adult populations combined • This means the dependency rate (nonworking population over working population) is falling

36. “Demographic Divide” • This trend of demographic divide is most evident in East Asia, Thailand and Indonesia • It is not as strong in South Asia where population growth is still high

37. “Demographic Divide” • The demographic divide is accentuated by an increase in labor force participation among women • As populations age and the demographic divide dissipates • Population age structures will begin to look like an inverted triangle • This will take some time – Europe is still much “older” than Asia with the exception of Japan (see Table 8.8)

38. Table 8.8

39. Issues in Population Growth & Control • Many questions to be answered such as “Which population control programs are most effective?” and “How should resources be allocated to different programs?” • Although we know that raising women’s educational attainment works to reduce fertility and that some family planning interventions work, a better data base for analyzing these population issues needs to be developed

40. A Brief Word about Population Control inPRC & India • One child per family policy has been in force for over 20 years • Families with more than one child face penalties, including loss of government subsidies and loss of salary • Policy raises ethical considerations, particularly since there is a preference for boys

41. A Brief Word about Population Control inPRC & India • This has led to infanticide and abortion of girl infants and fetuses • Preference for males in India has led to similar problems

42. Changes in working population in China in millions ages 15-59 by decade • 1975 – 1985 163 • 1985 – 1995 124 • 1995 – 2005 107 • 2005 – 2015 33 • 2015 – 2025 -29 • 2025 – 2035 -77

43. Fertility and Infant Mortality in Indian States • Infant mortality in poorest states averages 90 deaths per 1,000 births • Infant Mortality in richest states averages 56 deaths per 1000 births • Infant Mortality in Kerala averages 15 deaths per 1000 births. • Total fertility rate in poorest states averages 4.15 children over lifetime • Total fertility rate in richest states averages 2.7 children over lifetime • Total fertility rate in Kerala is 1.7 children over lifetime.

44. Summary • Basic concepts of population, and its effects on economic development • Economic model of fertility • Population growth and demographic transition in Asia • Policies implemented to reduce population growth