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Population Growth and Economic Development

Population Growth and Economic Development. Causes, Consequences, and Controversies. Pertemuan 6: Population and Economic Development. Outline. Trends in population growth Definitions and concepts The hidden momentum of population growth The demographic transition

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Population Growth and Economic Development

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  1. Population Growth and Economic Development Causes, Consequences, and Controversies Pertemuan 6: Population and Economic Development

  2. Outline • Trends in population growth • Definitions and concepts • The hidden momentum of population growth • The demographic transition • Effects of Population growth on economic development: Conflicting views

  3. Population Growth and Quality of Life 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?

  4. World Population Growth Rates and Doubling Times

  5. Population Growth Rates in Developed and Countries, 1950-2000

  6. Geographical distribution of population

  7. Population: Historical and geographical trends

  8. Concepts and definitions (1) • Birth rate: 20 per 1,000, 20 newborn babies for every 1000 population • Death rate: 14 per 1,000 , an average of 14 people die for 1,000 population • Natural increase: birth rate minus death rate, in the example, 6 per 1,000 or 0,6% per annum • Rate of population increase: the percentage yearly net relative change in population, due to natural increase and net international migration. • .

  9. Concepts and definitions (2) • ASDR: average no. of deaths per year for every 1,000 members of the population in a particular age group • ASBR: average no. of births per year for every 1,000 members of the population in a particular age group

  10. Concepts and definitions (3) • ASFR: average no. of children per year born to women in a particular age group • Total fertility rate (TFR): the average number of children a woman would have, assuming that the current age-specific birth rates remain constant throughout her childbearing years (15-49 years of age).

  11. Concepts and definitions (4) • Dependency burden: • Youth dependency ratio • Old age dependency ratio

  12. Echo effect/hidden momentum • The youth dependency gives rise to the hidden momentum of population growth. • It is a dynamic latent process of population growth where population continues to grow despite a fall in birth rate due to larger number of child bearing couples. • Why? High population growth in the past led to a young age distribution, then a large fraction continues to be at the age where they are just about to marry and have families

  13. Population Pyramids: Less Developed and More Developed Countries; 1998

  14. Hidden Momentum of Population Growth

  15. The Demographic Transition (1)

  16. The Demographic Transition (2)

  17. FROM POPULATION TO ECONOMIC DEVELOPMENT

  18. Effect of population growth on economic growth Population Resources Resources: Human Resources (HR) Natural Resources (agricultural land; forests, mineral) (NR) Man-made Resources (Capital Formation) (CR)

  19. Effects of Population Growth on Economic Growth • Population growth restricts economic growth • The “pessimistic” theory • Population growth promotes economic growth • The “optimistic” theory • Population growth is independent of economic growth • The “neutralist” theory

  20. Effects of Population Growth on Economic Growth: Pessimists • Negative consequences of population growth • HR: underutilised, becomes constraints, liability, consumes, does not produce; constraints of the development of human resources (education and health) • NR: agricultural land cannot increase; deforestation; depletion of mineral resources • CR: constraints on the development of resources for increasing productive capacity

  21. Malthusian View (1) • 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) • Malthusian population trap: countries would be trapped in low per-capita incomes (per capita food), and population would stabilize at a subsistence level

  22. Malthusian View (2) • Higher economic growth increases population by stimulating earlier marriages and higher birth rates, and cutting down mortality from malnutrition and other factors • Higher population also depresses economic growth through diminishing returns • A stationary population in the long-run equilibrium

  23. Pessimists: Unfounded WHY? Developed economies: High level of economic growth Population increased But, the real GDP per capita also increased

  24. Effects of Population Growth on Economic Growth: Optimists (1) • Population is not the problem but the following are, e.g.: • Underdevelopment (culture, e.g) • Resource depletion and environmental degradation • Population distribution • Subordination of women

  25. Effects of Population Growth on Economic Growth: Optimists (2) • Positive effects of population growth: • HR: enlarge labour force, fully and efficiently utilised, increases economic growth • Provides a large domestic market for the economy • Encourages competition, which induces technological advancements and innovations

  26. Effects of Population Growth on Economic Growth: Neutralists • No statistical relationship between population and economic growth. • Developing countries can take advantage of the demographic dividend.

  27. Effects of Population Growth on Economic Growth: Conclusion NO CONSENSUS WHETHER POPULATION GROWTH IS BENEFICIAL OR DETRIMENTAL TO ECONOMIC GROWTH IN DEVELOPING ECONOMIES

  28. Demographic Dividend (1) Variation in productivity with age Variation in consumption with age Changes in population age structure The divergence between production and consumption interacts with changes in population age structure demographic dividend

  29. Demographic Dividend (2) First dividend: changes in population age structure that increase the share of population concentrated at the productive ages How to quantify the first dividend Support ratio: the ratio of effective number of producers to the effective number of consumers

  30. Demographic Dividend (3) Example: East Asia: A ‘baby boom’ generation was created, once it reached working age, it boosted saving rates and also the size of labour force; from 1965 to 1990, the working-age population grew by 2.6%/year and the dependent population by just 1.0%/year. This demographic dividend explains up to 33% of East Asia’s economic miracle between 1965-1990

  31. Demographic Dividend (4) Second dividend: population ageing, given appropriate policy and institutional arrangements, may arise, as changes in age structure can influence the process leading to the creation of wealth One possibility: population ageing a rapid accumulation of capital raise labour productivity (output/worker)

  32. Effects of Population Growth on Economic Growth: Conclusion • A large population growth could have both negative and positive impacts on productivity • Net relationship between greater population and economic growth depends on whether the inducement to human capital and expansion of knowledge are stronger than diminishing returns to natural resources

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