The Population Problem

population growth

• Since beginning of common era

(AD 1), population has grown to 6 billion

• At the current 2% growth rate, next 5 billion could take only 35 years!

• 98% of population growth between 1998 and 2025 expected to occur in poorer countries

population and development

• as long as each person contributes something to the economy (positive MP), pop and econ growth positively correlated

• but, if MP<AP, declining welfare of the average citizen

output equation

• O = LX• O: output• L: number of workers• X: output per worker

• O/P = (L/P)X…output per capita• P: population

output per capita

• output per capita determined by• share of population in labor force (L/P)• output per worker (X)

• whatever affects these 2 factors is population growth’s effect on development

factor 1: share of population in labor force

• changes in age distribution• rapid growth means higher percentage of

young people• large supply of people too young to work

• slow growth means high % of older people• retirement effect

• high pop growth retards per capita economic growth by decreasing % of pop in labor force

age structures

factor 2: output per worker

• most common productivity enhancer: accumulation of capital

• is there a connection between pop growth and cap accumulation?

• 2 connections:• more savings leads to more capital

• fast growing pop save less

• law of diminishing marginal productivity• with fixed factor (land), adding more labor diminishes

productivity

could pop growth enhance output per capita?technological progress / economies of scale

population / environment connection

• trees cut for fuel for an expanding population or to clear land for agriculture

• marginal lands being brought into production

• migration to river deltas in search of fertile soil: vulnerable to storm surges

population / environment connection debate

• Malthusian hypothesis (positive feedback)

• more people, less resources, must travel further for fuel, have more children to help, intensifying scarcity problems

• Boserup’s induced innovation (negative feedback)

• increased pop triggers more demand for agriculture, incentives emerge for innovation, results in more intensive, sustainable practices

what about effect of development on population?

• theory of demographic transition: as nations develop they eventually reach a point where birthrates fall

• stage 1: prior to industrialization, birthrates / death rates stable

• stage 2: after industrialization, lower death rates (same birthrates)

• stage 3: falling birthrates

demographic transition

economics of pop control

• will parents make efficient childbearing decisions?

• sources of market failure• congestion externalities• low key commodity prices artificially lower

costs of children• food• education…school taxes same for 2 vs. 6 children

microeconomic theory of fertility

• children are “consumer durables”

• MB of children is downward sloping• ceteris parabis, as children become more

expensive, demand for them will diminish

• example• MB1=MC1, optimal children Q1• if MB shifts down or MC up, less is optimal• what would cause these to shift?

changing desired family size

• decreased benefits• shift from agriculture to industry • less demand for children as social security• decrease in infant mortality

• increased costs• increased opportunity cost of mother’s time

(more educational and labor mkt opportunities)

• scarcity / cost of housing• cost of education

marginal benefits and costs of children

policy

• China: subsidize 1-child families, tax additional children • extreme, strong resistance, unintended

consequences

• enhancing status of women

• providing alternative sources of old-age security

• access to credit (microfinance)