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Sriya Iyer

Faculty of Economics and St. Catharines College

University of Cambridge

Demography and Development

Topic 1Why do economists want to explain demographic

behaviour? Transition theory and the Malthusian model

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Contents

Recent demographic patterns in developing economies

Explaining past and current trends in population

theory of demographic transition

Malthusian model

microeconomic household demand model

Demographic and economic literature on

macro- and micro reproductive externalities

social norms and social interactions

mortality and missing women

General policy debates about population

Specific population debates in India, China, Kenya, the Middle East and Sub-Saharan Africa

Course outline handout provides:

Essential reading for course

Specific reading for each topic (also available on Faculty website)

Suggested supervision questions

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Why do economists want to explain demographic behaviour?

Historical trends in population growth

Population bomb or population explosion - is population harmful or beneficial for economic

development?

Contemporary population debates echo what Malthus set out on 7 June 1798 in the Preface to hisAn Essay on the Principle of Population:

It is an obvious truththat population must always be kept down to the level of the means of

subsistence and it is a view of these means which forms the strongest obstacle in the way to any

very great future improvement of society.

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What are the main trends in population growth throughout the last two

millennia?

Year World Pop Year World Pop Year World Pop Year World Pop

1 AD 300m 1800 950m 1933 2,057m 1995 5,716m

1500 600m 1850 1,200m 1950 2,515m 2000 6,130m

1750

800

m 1900

1,650m 1985 4,8

00m

20308,

200m*

*Projected estimate, based on current trends

Natural population increase occurs when the birth rate is higher then the death rate

An individuals countrys population growth compared to world population growth

Growth rate: Worldwide population growth rate is 1.5% per year, and this is expected to continue

Size: In absolute numbers, the population is growing by about 230,000 people a day

Regional imbalance: 90% of this increase is forecast to be in less developed countries

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What are the differences between historical trends in population

growth and current trends in global population?

Mortality trends: 20C LDC mortality lower than in 19C LDCs.

DR/BR balance: DR decline preceded the decline in BR by 20 years.

The result: very high rates of population growth of3-4% a year. 20C LDC fertility is 150% greater

than the maximum achieved in 19C.

Post 1960 and demographic momentum: birth rates have also been declining rapidly in most

LDCs.

Strong regional differences: between LDCs, Sub-Saharan Africa and the Middle East

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What is the empirical association between population and economic

development?

Inverse relationship: higher average income

lower fertility. Sub-Saharan Africa (4-6

children) vs. East Asia and Latin America (2-3

children).

Outliers: Middle East, China, India

Faster growth during the 20C than during the

19C, particularly in LDCs.

Related to the balance between trends in

mortality and fertility.

Direction of causation between population and

development unclear

Region Average Fertility

Rate (1995)

GNP per capita ($)*

(1995)

Sub-Saharan Africa 5.7 490

Middle East and

North Africa

4.2 1780

South Asia 3.5 350

Latin America and

the Caribbean

2.8 3320

East Asia and the

Pacific

2.2 800

Europe and Central

Asia

2.0 2220

China 1.9 620

India 3.2 340

World 2.9 4880

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Is population growth good or bad for economic development?

Improvement in development indicators: World food production, infant survival, life expectancy at

birth, literacy have all improved despite rapid population growth

Positive externalities of human genius (Boserup, Simon)

Models of endogenous growth: new ideas or knowledge are main source of economic growth;population growth increases markets for goods and services.

Are poor people in LDCs irrational?

Is a collection of reasoned decisions at the individual level always optimal at the collective level?

What are the resource allocation failures in the context of childbearing?

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What are the major sources of possible negative externalities of high

fertility and fast population growth?

Savings & investment (esp. human capital investment)

Environmental externalities (esp. well-defined property rights) and the tragedy of the commons

Social norms Marshallian atmospheric externalities

Theories to explain population growth in developing economies:

Theories of demographic transition

Malthusian theories

Microeconomic household demand models Models of social interactions

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What demographic patterns does demographic transition theory

identify?

Stage I = High birthrates & high deathrates

typical birthrate 35 per 1000,

typical deathrate 30 per 1000.

slow population growth of0.5% p.a.

Stage II = modernization

Deathrates fall from 30 per 1000 to 20 per 1000

life expectancy rises from 60

Birthrates stay high (35 per 1000)

fast pop. growth of 1.5% p.a.

Stage III = further modernization falls from 35 per 1000 to 10 per 1000

deathrate continues to fall to 10 per 1000

Birthrate & deathrate converge, and population growth is zero or very slow

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What are the problems with demographic transition theory?

Demographic transition theory is purely descriptive

Differences in transition for some present-day LDCs from the western European experience

First difference in Stage I. Before 1950, LDCs had birthrates (at 43 per 1000) & deathrates (at

37 per 1000) much higher than Europe at same stage

Second difference in Stage II. Deathrate did begin to fall in most LDCs from 1950. But much

faster than in 19C LDCs to 10 or 15 per 1000. So, instead of growing only at 1.5% p.a., 20C LDC

populations grew at 2-2.5% p.a

Third and most crucial difference is in Stage III. Consider2 cases A and B on diagram.

Majority of LDCs (sub-Saharan Africa) still in Case B. Failure to experience entire mortalitydecline of Stage II because of widespread & persistent poverty

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Thomas Robert Malthus (1766-1834)

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How did Malthus explain the relationship between population and

economic development?

The view that he has given of human life has a

melancholy hue, but he feels conscious that he

has drawn these dark tints from a conviction

that they are really in the picture, and not from

a jaundiced eye or an inherent spleen of

disposition. The theory of mind which he hassketched accounts for the existence of most of

the evils of life!

Thomas Robert Malthus,An Essay on the

Principle of Population (1798)

The Malthusian model:

Population grows at a geometric rate

Food supply grows at an arithmetic rate

The very striking consequence: per capita

incomes fall to subsistence

Avoid absolute poverty by indulging in moral

restraint

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What 3 assumptions underlie the population trap theory?

Diminishing returns to scale in production.

Positive income effect on fertility.

Reproductive behaviour homogeneous across economy.

What is the population trap? (See Figure 1)

Point A = Malthusian population trap level of income is attained, economy stuck at chronic low

income, Y1.

Point A is a stable equilibrium

For poor nations to overcome population pressures, they will need

Malthusian preventive checks such as delayed marriage and birth control

Malthusian positive checks such as starvation/disease/wars will restrain population

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How do we get out of the Malthusian trap?

A "big push" far enough away from point A to

escape forces pushing economy back into

equilibrium.

Types of "big push" to get to Point B:

On the P curve. By preventive checks e.g.

family limitation programmes

On the Y curve. An investment &

industrialization programme

What does the Malthusian population

trap theory not explain?

The Industrial Revolution

Shape ofY curve: technological progress

Shape of P curve: mortality and fertility dont

relate to income in predicted way

Poverty in India in the nineteenth century

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The views of Malthus contemporaries

It begins with the assumption that population tends to increase in a geometrical ratio while

subsistence can at best be made to increase in only an arithmetic ratio an assumption just as

valid, and no more so, than it would be, from the fact that a puppy doubled the length of his tail

while he added so many pounds to his weight, to assert a geometric progression of the tail and an

arithmetic progression of the weight the savants of a previously dogless island might deduce the

very striking consequence that by the time the dog grew to a weight of fifty pounds his tail wouldbe over a mile long and extremely difficult to wag, and hence recommend the prudential check of a

bandage as the only alternative to the positive check of constant amputations.

Henry George, Progress and Poverty(1879)

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Can we draw lessons from Malthusian theory today?

Inevitable effect of population on the standard of living

Influence on policy-making and model-building in economics

But, Malthusian theories are flawed by the assumptions of diminishing returns and of a positive

income effect on fertility

=>We need a better theory of the relationship between population and economic

development!

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Useful Reading (the most important are starred)

On the relation between population and development

*A. C. Kelley, Economic consequences of population change inthe Third World, Journal of economic literature 26 (1988).

*N. Birdsall, Analytical approaches to population growth, in H.Chenery & T. N. Srinivasan (eds.), Handbook of development

economics vol. 1 (1988).

P. Dasgupta, The population problem: Theory and evidence,Journal of economic literature 33, 1879-1902 (1995).

World Bank, World development report 1984: Population (1984).

World Bank, Beyond economic growth Chapter III on WorldPopulation Growth (2000).

On demographic transition theory

*J. C. Caldwell, Towards a restatement of the demographictransition theory Population and Development Review 2(3-4),321-366 (1976).

J.-C. Chesnais, The Demographic Transition: Stages, Patternsand Economic Implications. Oxford: Oxford University Press(1992).

A. J. Coale and S. C. Watkins, The Decline of Fertility in Europe.Princeton: Princeton University Press (1986).

On the Malthusian model

T. R. Malthus, An Essay on the Principle of Population, P. James(ed.) 2 volumes, Cambridge (1989).

S. Hollander, The Economics of Thomas Robert Malthus, Studiesin Classical Political Economy IV, University of Toronto Press(1997), esp. 13-69.

*D. R. Weir, Malthuss theory of population, in J. Eatwell et al.(eds.), The new Palgrave: Economic development (1987),236-231.