Developmental Economics

1. Chapter-One
1
Population Growth and
Economic Development
Causes, Consequences, and
Controversies
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2. 2
Outline
☻Basic issues
☻Trends in population growth
☻Definitions and concepts
☻The hidden momentum of population growth
☻The demographic transition
☻The causes of high fertility in developing countries:
theories
☻Effects of population growth on economic development:
Conflicting views
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3. 3
1. The Basic issues: population growth
and the quality of life
► world population estimate 2010: 6.9 bln; projected at 9.2 bln in
2050
► overwhelming majority will be in the developing world
► should we worry? Or is this a opportunity?
► After all, the world population grew very little up until 1800
(when economic growth was low) and then ‘exploded’ but at the
same time the world kept getting richer on average.
► The first billion was reached in 1804, the second in 1927 (123
years later), the third in 1960 (33 years), the fourth in 1974 (14
years), the fifth in 1987 (13 years), the sixth in 1999 (12 years),
seventh in 2012(12 years) and Eighth 2022(10 years).
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4. 4
Basic issues------------------
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5. 5
Population: Historical trends
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6. 6
Population Growth, 1750-2200:
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7. 7
☻The reason for the sudden change in overall population trends is that for
almost all of recorded history, the rate of population change, whether up
or down, had been strongly influenced by the combined effects of
famine, disease, malnutrition, plague, and war—conditions that resulted
in high and fluctuating death rates.
☻ In the twentieth century, such conditions came increasingly under
technological and economic control. As a result, human mortality (the
death rate) is now lower than at any other point in human existence.
Basic issues------------------
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8. 8
☻It is this decline in mortality resulting from rapid technological
advances in modern medicine and the spread of modern sanitation
measures throughout the world, particularly within the past half century
that has resulted in the unprecedented increases in world population
growth, especially in developing countries.
☻ In short, population growth today is primarily the result of a rapid
transition from a long historical era characterized by high birth and
death rates to one in which death rates have fallen sharply but birth
rates, especially in developing countries, have fallen more slowly
from their historically high levels.
Basic issues------------------
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9. 9
population growth and the quality of life
► Each year about 75 mln people added to the world
population; of which 97% in developing countries
► 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 there a relationship between what the developed
countries have experienced demographically and
what the developing countries are facing now?
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10. 10
2. Structure of the World population
and age structure
I. By geographic region
 More than 3/4 live in developing countries
 Africa will grow the most till 1950
 Africa, LA, Asia = 88% of world population
in 2050 (70% in 1970)
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11. 11
Geographical distribution of population
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12. 12
Population: Historical and geographical trends
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13. 13
Population: Historical and geographical trends
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14. 14
3. 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.
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15. 15
►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.
Concepts conti……………..
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16. 16
Hidden Momentum of Population Growth
 Perhaps the least understood aspect of population
growth is its tendency to continue even after birth rates
have declined substantially.
 Population growth has a built-in tendency to
continue, a powerful momentum that, like a speeding
automobile when the brakes are applied, tends to
keep going for some time before coming to a stop.
 In the case of population growth, this momentum can
persist for decades after birth rates drop.
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17. 17  There are two basic reasons for this:
⁂ First, high birth rates cannot be altered substantially overnight.
 The social, economic, and institutional forces that have influenced
fertility rates over the course of centuries do not simply evaporate
at the urging of national leaders.
 We know from the experience of European nations that such
reductions in birth rates can take many decades.
 Consequently, even if developing countries assign top priority to
the limitation of population growth, it will still take many years to
lower national fertility to desired levels.
Hidden conti………..
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18. 18 ⁂ The second and less obvious reason for the hidden momentum of
population growth relates to the age structure of many developing
countries’ populations.
 Figure below illustrates the great difference between age structures
in less developed and more developed countries by means of two
population pyramids for 2010.
 Each pyramid rises by five-year age intervals for both males and
females, with the total number in each age cohort measured on the
horizontal axis.
Hidden conti………..
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19. 19
Population Pyramids: All Developed and
Developing Countries and Case of Ethiopia
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20. 20  The figure clearly reveals that most future population growth
will take place in the developing world.
 The steeper bottom rungs for the developing world as a whole,
reflects the large declines in population growth in lower-
middle income developing countries over the past quarter
century, and particularly in China.
 For developed countries, in the contemporary period the
population in middle cohorts(group) is typically greater
than that of young cohorts;
 In contrary, the less developed nation’s pyramid expressed as
share of population, young people greatly outnumber their
parents.
Hidden conti………..
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21. 21
4. The Demographic Transition
 The process by which fertility rates eventually decline to
replacement levels has been portrayed by a famous
concept in economic demography called the
demographic transition.
 The demographic transition attempts to explain
why all contemporary developed nations have more
or less passed through the same three stages of
modern population history.
Three stages:
First phase:: for millennia, birth and deaths rates have
been very high and of similar magnitudes, yielding
extremely low population growth. 5/20/2024
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22. 22
Second phase: death rates started declining thanks
to better health practices and increases in agricultural
and industrial productivity; with first steady birth rates
and then demographic inertia due to the age structure,
this caused population to explode in Europe in the
19th century and in the developing world in the mid-
20th century.
Third phase: with declining birth rates and an aging
population, birth and death rates again converge to a
low-level equilibrium already reached by developed
countries.
The Demo. Transition………………..
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23. 23 The Demographic Transition
The Demo. Transition………………..
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24. 24
The Demographic Transition in LDCs
The Demo. Transition………………..
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25. 25  while developing countries are either in the
second or at the beginning of the third phase
 For developing countries: things happened much
later, and with much more variety in outcomes
 Birth rates higher than in pre-industrial Europe
(women marry younger)
 case A: Taiwan; China; S. Korea, Chile, etc. —
rapid fall in population growth
 case B: death rates stay high (poverty, AIDS) —
SSA, some middle-East
The Demo. Transition………………..
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26. 26
5.Causes of High Fertility in Developing Countries
A. The Malthusian population trap
 More than two centuries ago, the Reverend Thomas Malthus put forward a
theory of the relationship between population growth and economic
development that is influential today.
 Writing in his 1798 Essay on the Principle of Population and drawing on the
concept of diminishing returns, Malthus postulated a universal tendency for the
population to grow at a geometric rate, doubling every 30 to 40 years.
country, unless checked by dwindling food supplies,
 At the same time, because of diminishing returns to the fixed factor, land, food
supplies could expand only at a roughly arithmetic rate.
 In fact, as each member of the population would have less land to work, his or
her marginal contribution to food production would actually start to decline.
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27. 27
►Because the growth in food supplies could not keep pace with
the burgeoning population, per capita incomes would have a
tendency to fall so low as to lead to a stable population existing
barely at or slightly above the subsistence level.
►Malthusian population trap: countries would be trapped in
low per-capita incomes (per capita food), and population would
stabilize at a subsistence level.
►Malthus therefore contended that the only way to avoid this
condition of chronic low levels of living or absolute poverty was
for people to engage in “moral restraint” and limit the
number of their progeny.
 preventive checks
 positive checks(starvation, disease, wars)
►Hence we might regard Malthus, indirectly and inadvertently,
as the father of the modern birth control movement. 5/20/2024
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28. 28
Criticisms
 The Malthusian theories as applied to contemporary developing
nations have severely limited relevance for the following reasons:
1. They do not take adequate account of the role and impact of
technological progress.
2. They are based on a hypothesis about a macro relationship
between population growth and levels of per capita income that
does not stand up to empirical testing of the modern period.
3. They focus on the wrong variable, per capita income, as the principal
determinant of population growth rates.
4. A much better and more valid approach to the question of
population and development centers on the microeconomics of
family size decision making in which individual, and not
aggregate, levels of living become the principal determinant of a
family’s decision to have more or fewer children.
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29. 29
► 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.”
B. The Microeconomic Household Theory of Fertility
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30. 30
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.
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31. 31
Demand for Children Equation
n
x
t
P
P
Y
f
C x
x
c
d ,...,
1
),
,
,
,
( 

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
Micro Theory of Fertility...
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32. 32
Demand for Children Equation Micro Theory of Fertility...
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33. 33
Microeconomic Theory of Fertility: An Illustration
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34. 34
Implications of Women’s Education for
Development and Fertility
the following factors lead to decreased birth
rates
 increase in the education of women
 increase in female non-agriculture wage employment oppotunity
 rise in family income
 reduction in infant mortality
 development of old-age and social security safety nets
 expanded schooling opportunities (to exploit the quality trade-off)
 Of course, information about birth control
practices would help too.
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35. 35
6. The Consequences of High fertility:
Some Conflicting Opinions
I. Pop. Growth is Not a Real Problem/ Optimist view
II. Population growth is a Real Problem /Pessimist view
III. Neutralist view
 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
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36. 36 I. “Population growth is Not a Real Problem” Arguments:
According to this argument, the real problem is not
population growth but the following:
 Underdevelopment- If correct strategies are pursued and lead to
higher levels of living, greater self-esteem, and expanded freedom,
population will take care of itself.
 World resource depletion and environmental destruction-
less than one-quarter of the world’s population, consume almost 80%
of the world’s resources.
 Population Distribution-too many people concentrated in too
small an area
Subordination of women-their inferior roles
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37. 37
II. Population Growth Is a Real Problem arguments/ Pessimists
Extremist arguments: Population and the Global Crisis
 This position attempts to attribute almost all of the world’s economic
and social evils to excessive population growth.
 It is regarded as the principal cause of:
 poverty,
 low levels of living,
 malnutrition,
 ill health,
 environmental degradation, etc.
 Calls for coercive measures such as compulsory sterilization to
control family size
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38. 38
Theoretical arguments:
 Population-poverty cycle theory & the need for
family planning;
Too rapid population growth yields negative
economic consequences and thus should be a real
concern for developing countries.
 Advocates start from the basic proposition that
population growth intensifies economic, social, and
psychological problems.
Pessimists------------------------
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39. 39
Pessimists-----------
 Negative consequences of population growth on:
Economic growth
Poverty and Inequality
Education
Health
Food
Environment
International migration
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40. 40
III. 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.
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41. 41
► Lower economic growth: evidences shows that large family size Lowers per capita
income growth in most developing countries, especially those that are already poor.
► Poverty & Inequality:
-Poor people usually bear burden of population.
-To the extent that large families perpetuate poverty, they also aggravate inequality.
► Adverse impact on education:
-Large family size and low incomes restrict the opportunities of parents to educate all
their children. At national level, it causes educational expenditures to be spread more
thinly, lowering quality for the sake of quantity.
► Adverse impact on health:
-High fertility harms the health of mothers and children.
-It increases the health risks of pregnancy, and closely spaced births have been shown to
reduce birth weight and increase child mortality rates.
1.7.Empirical arguments: Seven Negative Consequences
of Population Growth
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42. 42
►Food issues: Feeding the world’s population is made more difficult by rapid
population growth
►Impact on the environment: Environmental degradation occurs in the form
of:
-deforestation,
-fuel wood depletion,
-soil erosion,
-declining fish and animal stocks,
-inadequate and unsafe water,
-air pollution, and urban congestion Frictions
►Impact on international migration:
-an excess of job seekers (caused by rapid population growth) over job
opportunities is surely contributes to illegal international migration.
Seven Negative Consequences of Pop……………………..
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43. 43
Toward a Consensus
 Despite the conflicting opinions, there is some common
ground on the following:
 Population is not the primary cause of lower living
levels, but may be one factor;
 Population growth is more a consequence than a cause
of underdevelopment;
 It’s not numbers but quality of life;
 Market failures: potential negative social externalities;
 Voluntary decreases in fertility is generally desirable
for most developing countries with still-expanding
populations
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44. 44
What Developing Countries Can Do?
Persuasion/ treat through education
Family planning programs
Address incentives and disincentives for having children
through the principal variables influencing the demand for
children
Coercion / influence is not a good option
Raise the socioeconomic status of women
Increase employment opportunities for women (increases
opportunity cost of having more children, as in
microeconomic household theory)
1.8 Some Policy Approaches
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45. 45
II. What the Developed Countries Can Do Generally
Address resources use inequities
More open migration policies
 How Developed Countries Can Help Developing
Countries with Their Population Programs?
Research into technology of fertility control
Financial assistance for family planning programs
Policy Approaches cont’d--------------------------------------
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