Aravinda Meera Guntupalli

Population Growth and Economic Development

Facts on world population

Total world population: 6.1 billion 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 By 2200, over 90% of population will live in what

today are developing countries

Topics

Demographic measures Population growth in the world Theories of population Policies

Demographic measures Birthrate Death rate Rate of natural increase Infant mortality rate Life expectancy at birth Doubling time Dependency ratio

Terms used

Fertility Mortality Migration Age structure Hidden momentum of population growth

Population and economic growth

Reduction in birthrates can raise per-capita income in 2 ways

lower dependency ratio low consumption and high savings Shift of labor force investment from

capital widening to capital deepening

Different issues related to development Some important quality of life indicators

related to population growth– Improvement of levels of living – Increase in the labor forces– Higher population growth rates and poverty– Quality of health care and education – Relationship between poverty and family

size

Population Growth, 1750-2200: World, Less Developed Regions, and More Developed Regions

Population Pyramids: Less Developed and More Developed Countries; 1998

The Demographic Transition

Stage I: high birthrates and death rates Stage II: continued high birthrates,

declining death rates Stage III: falling birthrates and death

rates, eventually stabilizing

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

Investments in older people less likely to enhance productivity

The present demographic transition in developing countriesStage 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.

Rapid and Slow Transition

Rapid transition Japan South Korea Taiwan Singapore Thailand Indonesia

Slow Transition Pakistan India Bangladesh Philippines Papua New Guinea

Miracles of rapid transition in East Asia Rapid demographic change creates windows

of opportunity for accelerated economic growth– Rapid growth of labor force– Saving and investment– Changing roles of women– Human resource investment

Stage of Demographic Transition and population requirement Population growth may be good at the

beginning In the middle factors like political

stability, cultural resources, and economic efficiency may be much more important than population growth

Reaching high income may require slowing growth

Fertility and income

Malthusian population model 1798

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.– Preventive and positive checks

– Technological progress is not considered

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

Other theories

Why are there so many children in poor countries? Because children are an “investment” rather

than a “consumption good” the “expected return of theinvestment” is given by child labor and financial support for parents in old age

Parents have children up to the point at which their marginal economic benefit is equal to marginal cost

Hidden momentum of population growth It is the tendency of population growth to

continue, even after birthrates have decline substantially. – Substantial changes in birthrates may take

decades– when the young population is large, in the near

future high-fertility population will be high,even if fertility levels are lower.

Policy approach to deal with the high population growth

Decrease “marginal economic benefit of children”:

Increase the minimum-age child labor provide better old-age social security Increase “marginal cost of children” Increase education, employment and wages

for women

Policy approach

Better water and public health programs in rural and urban poor areas to lower infant mortality

Implementation of family-planning programs Improvement of quality of care of health and

family planning programs Monetary subsidies to small families Political commitment and role of religious leaders