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Population Growth and Economic Development

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  1. Population Growth and Economic Development Causes, Consequences, and Controversies

  2. Outline • Trends in population growth • Definitions and concepts • The hidden momentum of population growth • The demographic transition • The causes of high fertility in developing countries • Effects of Population growth on economic development: Conflicting views • Policy options: Case study of Somalia

  3. Case study • Population, famines, and entitlement theory: Application to the case of Somalia. • Note: Three copies of the case study are placed on reserve (ECON 320) in the Main library

  4. The Basic Questions • Is there a relationship between population growth and QOL? • Six major issues: • Will developing countries be able to improve levels of living given their anticipated population growth? • How will developing countries deal with the vast increases in their labor forces? • How will higher population growth rates affect poverty?

  5. The Basic Issue • Population growth and QOL • 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? • Is there a relationship between poverty and family size? • Is affluence in developed countries more harmful to global environment and to the poor than the absolute increase in their numbers?

  6. Population: Historical trends

  7. Population Growth, 1750-2200:

  8. World Population Growth Rates and Doubling Times

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

  10. Geographical distribution of population

  11. Population: Historical and geographical trends

  12. Population: Historical and geographical trends

  13. Concepts and definitions • Rate of population increase is measured as the percentage yearly net relative change in population due to natural increase and net international migration. • Natural increase is the difference in the fertility rate and mortality rate. • Total fertility rate (TFR) is the average number of children a woman would have assuming that the current age-specific birth rates remain constant throughout her childbearing years. The child bearing years range between 15-49 years of age.

  14. Concepts and definitions • Dependency burden: • Youth dependency ratio • Old age dependency ratio • 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.

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

  16. Hidden Momentum of Population Growth

  17. Hidden Momentum of Population Growth

  18. Effects of Population Growth on Economic Growth

  19. The Demographic Transition

  20. The Demographic Transition

  21. Causes of High Fertility in Developing Countries • The Malthusian population trap • Population grows at a geometric rate and food supplies expand at an arithmetic rate. • Percapita incomes would fall to the subsistence level • Criticisms • Assumes decreasing returns to scale • Assumes relation between population growth rate and levels of per capita incomes • Focus on the wrong variable- percapitaincome

  22. Malthusian population model • 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 1. preventive checks 2. positive checks

  23. Causes of High Fertility: Malthusian Population Trap

  24. Malthusian Population Trap: Criticism

  25. Causes of High Fertility in Developing Countries • The Microeconomic Household Theory of Fertility • Individual or family decision making is the principal determinant of family size • The interplay between microeconomic determinants of family fertility are understood using theory of consumer choice • Fertility decisions (family size) are taken at the microeconomic level by households. It is a rational economic decision of “demand for children.”

  26. Microeconomic Theory of Fertility • Why are there so many children in poor households? • children are an “economic investment” rather than a “consumption good” • the “expected return of the investment” is given by child labor and financial support for parents in old age • In developing countries, parents have children up to the point at which marginal economic benefit = marginal private cost

  27. Microeconomic Theory of Fertility • Empirical evidence • observations for population growth

  28. Demand for Children Equation Where Cd is the demand for surviving children Y is the level of household income Pc is the “net” price of children Px is price of all other goods tx is the tastes for goods relative to children

  29. Demand for Children Equation Under neoclassical conditions, we would expect:

  30. Microeconomic Theory of Fertility: An Illustration

  31. Views on population and economic development • Pessimist view • Optimist view • Neutralist view Please complement the slides with the lecture notes.

  32. 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

  33. Effects of Population Growth on Economic Growth: Pessimists • Negative consequences of population growth on: • Economic growth • Poverty and Inequality • Education • Health • Food • Environment • International migration

  34. Effects of Population Growth on Economic Growth: Pessimists • Negative consequences of population growth on: • Extremist argument • Population-poverty cycle theory

  35. Effects of Population Growth on Economic Growth: Optimists • Population is not the problem but the following are: • Underdevelopment • Resource depletion and environmental degradation • Population distribution • Subordination of women • Extreme view • International dependence theory • Revisionist view point

  36. 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. • CONCLUSION: CONSENSUS OPINION ON POPULATION GROWTH

  37. Effects of Population Growth on Economic Growth: Consensus • CONCLUSION: CONSENSUS OPINION ON POPULATION GROWTH