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Economic Consequences of Population Change: Focus on Developing Countries

Pessimistic or Alarmist Theory


Malthus - 19th century, Coale & Hoover (1958), Paul Ehrlich (Population Bomb), Meadows (Limits to Growth) 1960s and 1970s. Focus on population policy & fixed, non-renewable resources.

Optimistic Theory Ester Boserup 1960s 70s (agric. Intensification)


Julian Simon 1970s - 80s (human capital) influencial in Reagans anti-family planning policies

Neutralist or Revisionist Theory


Allen Kelley/Ron Lee/Simon Kuznets/Natl Academy of Sciences 1986 Report mid 1980s to the present. Focus on longer-term, policy feedbacks, mixed impacts, renewable resources & property rights. Population Matters by Nancy Birdsall et al 1990s (somewhat more pessimistic as surveys confirm overall negative impact of population growth on per capita output growth across a large # of countries)

Economic Consequences of Population Change: Focus on Developing Countries

Pessimists law of diminishing returns


labor

food

With land held fixed, increased population (labor) eventually leads to diminishing output food, per capita, hunger and famine Growing population leads to capital or resource shallowing lower capital/labor ratios, thus, reduced per capita output and lower economic growth rates Age-dependency high pop growth rate raises requirements for household consumption, reduces savings, postpones demographic transition Growing population leads to investment diversion from physical infrastructure to basic needs education, health, shelter.. lowering economic growth rates

Economic Consequences of Population Change: Focus on Developing Countries

Optimists Between 1970 and 2000, World Population doubled from 3 to 6 billion and per capita incomes increased by 2/3 Why? Population growth, labor abundance and relative land or capital scarcity lead to: Increase stock of human ingenuity/human capital Technological progress (Boserup agricultural intensification, Hayami & Ruttan - Induced Innovation Model)
IIM Changes in factor scarcities induce changes in factor prices that lead to innovations to reduce costs; innovations reduce scarcities; e.g. tractors scarce factor?, improved seeds, soil fertility scarce factor?, gas efficient cars scarce factor?, precision irrigation scarce factor?

Economies of scale for investment in infrastructure and research

Economic Consequences of Population Change: Focus on Developing Countries

Neutralists or Revisionists 1980s Worldwide, over long spans of time, and over recent decades, diminishing returns have been more than offset by countervailing forces. Allen Kelley No statistically significant clear relationship between population growth and economic growth. Neutralists or Revisionists current thinking Empirical studies from 1980s, published in 1990s, conclude: We arrive at the qualified judgment: rapid population growth, and its associated demographic components, appears to have exerted a fairly strong, adverse effect on the pace of economic growth over the period 1960-1995. Kelley and Schmidt, Population Matters - 2001

Economic Consequences of Population Change: Focus on Developing Countries Current Thinking Bottom Line High/rapid population growth rates will adversely affect economic growth, per capita income, poverty and health and education of children, where: Livelihoods depend on fragile or degraded natural resources (e.g. Sahel, Nepal, Philippines); Property rights are poorly defined Tragedy of the Commons; skewed land distribution; Government policies are biased against labor such as low investment in education, public health, family planning, agriculture and job creation. Population growth - particularly the demographic opportunity presented by low mortality, high initial but curtailing fertility, and high proportion of workers to dependents [name this!] will accelerate economic growth given functioning markets and enabling policies. Examples of East Asia vs. Latin America Enabling policies..?

Economic Consequences of Population Change: Focus on Developing Countries

As

such, while population growth exacerbates some problems, it may not be their most important cause. It therefore represents misplaced emphasis to confront such problems with population policies because without a change in economic policies, slower population growth simply postpones the day of reckoning, when the adverse consequences of ill-advised economic policies are tallied.

-Allen Kelley, Population Matters, 2001 Discuss

Economic Consequences of Population Change: Focus on Developing Countries


Fertility, Growth, Poverty and Welfare (Eastwood and Lipton)

What are the effects of high fertility (delayed demographic transition) on poverty? Empirical analysis across 45 developing and transitional countries: 1. Large negative impact on economic growth; 2. Large negative impact on distribution/equity (disproportionately reduced purchasing power + higher dependency ratio for poor households); Together, large negative impact on poverty; Plus negative impact on capabilities and well-being of poor via reduced access to education, health, nutrition.

3. 4.

Are economies of scale in consumption more, or less, important than sib crowding in their effects on poor households conversion efficiency. (e.g. conversion of given income into capabilities and welfare).

Economic Consequences of Population Change: Focus on Developing Countries

Fertility, Growth, Poverty and Family (Eastwood and Lipton)

Reasons the poor rationally attach high value to the benefits from many children:
1. 2. 3. 4. Infant/child mortality remains high; Sources of child labor & remittance income later on; Social security/safety net for elderly poor; Low child-rearing cost, esp. low opportunity cost of womens time.

Evidence shows high fertility, nearly spaced births in poor families.


Has high cost in health and nutrition of women and children, in educational opportunities for older siblings, especially girls, and in further oppression/ disempowerment of women, leading to continued high fertility; greatly increases risk of churning down from near poverty towards ultrapoverty among transient poor; Whereas, reduced fertility can reduce the damage from given levels of poverty.

Fertility decline

Economic growth Poverty

High fertility

Slow growth High inequity High poverty

Economic Consequences of Population Change: Focus on Developing Countries

Mutual causation means that rapid population growth with its usual accompaniments of early first births, large families, high child-adult ratios and near spacing of siblings may be not only a cause of poverty through the above mechanisms, but also a consequence of poverty probably due largely to constraints on, and rational behavior by, the poor. - Eastwood and Lipton
Discuss

Economic Consequences of Population Change: Focus on Developing Countries

More than any factor, the strength and nature of feedbacks attenuating or overturning initial impacts of population growth represents a major remaining area of contention in the population debate. - Allen Kelley, 2001
Discuss

Economic Consequences of Population Change: Focus on Developing Countries

.Declining population growth, fertility and mortality as well as larger populations and higher densities have all spurred growth. Kelley and
Schmidt, Population Matters, 2001

Discuss

Economic Consequences of Population Change: Focus on Developing Countries

The essence of the population problem if

there is a problem is that individual decisions with respect to demographic acts do not add up to the recognized common good; that choices at the individual level are not congruent with the collective interest. (Demeny 1986, from Kelley)
Discuss

Economic Consequences of Population Change: Focus on Developing Countries

Do the population-agricultural development links in poor countries offer good grounds for population optimism?
-Nadia Cuffaro, p. 1152 -Population pressure on land
-IIM, Boserup/ Agricultural intensification works for increasing land productivity (except for some countries in SSA) but not for labor productivity. Figure 1 on labor/land ratios vs. land productivity. Figure 2 on labor/land ratios vs. labor productivity.

-Population growth and agricultural incomes


-Entitlement over resources, purchasing power, food. Adequate food stocks does not ensure access to food. Declining real rural wages with population growth and lower labor productivity.

-Population growth and property rights on land


- Land scarcity may lead to privatization - incentives to invest in land improvements, or may lead to land concentration and degradation of common property management rules (open access).

Discuss

Economic Consequences of Population Change: Focus on Developing Countries

Pessimists, Optimists & Neutralists Compared Example 1 Economies of Scale


Optimists Population growth creates economies of scale for investment in infrastructure and domestic consumer demand. Neutralists Depends upon availability of K to invest, upon government priorities, and upon rural population densities, e.g. disburse rural populations in SSA vs. dense populations in S.Asia. Also depends on inward vs. outward looking trade policies, where former values large domestic markets and latter less so.

Example 2 - Capital/resource shallowing and diversion


Pessimists Population growth leads to lower per capita output and growth. Neutralists Studies show savings and economic growth impacts are negative but modest in size. Little evidence of diversion from investment in physical infrastructure to basic needs health, education, unless supported by increased growth and income.

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