Chapter 6 Notes PDF

Preview

Summary

ch6 economic development...

Description

Summary: Economic Development 1 By: Nena Alvarenga

Chapter 6: Population Growth and Economic Development: Causes, Consequences, and Controversies The Basic Issue: Population Growth and Quality of Life 1. 2. 3. 4. 5. 6.

Given current levels of population growth will developing countries be able to improve? How will LDCs deal with increases in the already cheap labour force? What are the implications of PG on the chances of the poor overcoming misery? Will LDCs be able to develop health and education systems? Controversy between poverty and family size (large)? Is the pursuit of increasing affluence among the rich more detrimental to the global environment?

Population Growth: Past, Present, and Future World Population Growth throughout History    

12,000 years ago population was 5 million  2,000 years ago population was 250 million and in the year 2000 population reached 6 billion Population growth isn’t always steady due to natural catastrophes and variation among region Today’s growth rate is at a historical high: 1.2% per year Population trends are influenced by famine, disease, malnutrition, plague and war BUT these conditions came under control due to economics and technology. o Large population due to decrease in death rates

Structure of the World’s Population       



Geographic Region More than ¾ of the world live in developing countries. Latin America, Africa and Asia will share 88% of world’s population in 2050. There is an ever-growing population share of the developing world. Fertility and Mortality Trends Rate of population increase: % yearly net relative increase due to “natural increase” and “net international migration”  mostly just natural increase. Birth rates in developing are much higher than in developed. Total fertility rate: average # of children a woman would have B/c of the AIDS epidemic, and high under-5 mortality rates... Sub-Saharan Africa has the lowest life expectancy. Age Structure and Dependency Burdens Population is very youthful in the developing world. Children under the age of 15 > 29% of the population.



o The youth dependency ratio: proportion of youth to economically active adults high Hidden Momentum of Population Growth The hidden momentum of population growth refers to the fact that it tends to keep going before coming to a stop (even if birth rates fall, growth will continue) o Birth rates fall substantially and not over night.

The Demographic Transition 



    

Demographic transition: process by which fertility rates eventually decline to replacement levels o Stage 1: before economic modernization slow population growth due to high birth and high death rates. o Stage 2: modernization brought life expectancy from 40 to 60 years. Death rates decreased b/c of health care, income improvements, healthier diets. BUT lower death rates didn’t come with decline in fertility  population growth was high o Stage 3: influences of modernization cause fertility do decline = zero population growth During the 1950s-60s stage 2 transitions occurred throughout most of developing countries... and imported medical technology caused LDC death rates to fall more rapidly than in 19 th century Europe. Stage 2 of LDC transition shows excess of 2.0% per annum growth rates. Some countries such as Taiwan and Chile, have entered stage 3 with lower death rates and declining fertility as well. Other countries have entered a period of sustained fertility rates such at Brazil and Mexico. Nonetheless other countries have failed to decrease death rates due to the AIDS epidemic, and have high birth rates. These countries are still in stage 2 (Sub Saharan Africa & Middle East) How can countries then get to stabilizing growth rates?

The Causes of High Fertility in Developing Countries: The Malthusian and Household Models The Malthusian Population Trap 

 

Malthus connected diminishing returns to population growth and therefore economic development. o “a universal tendency for the population of a country, unless checked by food shortages, to double every 30-40 years. Because of diminishing returns to the fixed factors (land, food,) could only grow at arithmetic rates. He proposed that the only way to not fall in chronic low levels of living + poverty, we had to “morally restrain” ourselves and limit reproduction. Malthusian population trap  also called the low level equilibrium population trap. o It can be graphed as a concave down curve, where percentages can be negative or positive. When it is 0 – population growth is stable.

Criticisms of the Malthusian Model



 

First: ignores the huge impact of technological progress in offsetting the growth-inhibiting forces of rapid population increases. o Malthus didn’t predict how technology could augment availability of land by rasing its quality even if quantity remained the same. o Technology is represented as an upward shift of the income growth TP cruve so that all levels of per-capita income are vertically higher than population growth curve. Second: assumption that national rates of population increase are directly positively related to the level of per capita income. We reject the Malthusian and neo-malthusian theories: o 1. They don’t take into account technological progress o 2. Based on a hypothesis about a macro-relationship between population growth adnd levels of per capita income o Focus on the wrong variable (per capita income) as the main determinant of population growth rates.

The Microeconomic Household Theory of Fertility  

Uses household and consumer behaviour of economics and optimization to explain family size decisions. Conventional theory: an individual with a given taste will chose to consume based on its utility function and given its budget constraint. o In family size theory children are considered a special kind of consumption good so that fertility becomes a rational economic response to the family’s demand for children relative to other goods. o Direct relationship between # children and income (which doesn’t apply to some poor societies).

      

Cd is the demand for surviving children – a function of: (Y) household income, the “net” price of children, price of all other goods, and taste for goods relative to children. The higher the income, the greater the demand for children Higher the price of children the lower the Q demanded Higher price of all other goods relative to children, greater the demand for children Greater the strength of tastes for goods relative to children, fewer children. Graph: the microeconomic theory of fertility  number of desired children, Cd, is measured along the horizontal axis and the total quantity consumed by the parents by the vertical. o The steeper the slope of the budget constraint, the higher the relative price of children o Increase in income is a parallel shift in the BC, which means more satisfaction by consuming both goods. o If there is an equal increase in household income and net child price, both a shift and downward rotation of the BC  fewer children

The Demand for Children in Developing Countries   

In developing countries children are seen partly as economic investment goods, w/expected return from child labour and financial support for parents at old age. Economic theory of fertility applied to LDCs exists primarily with regard to marginal children considered as investments. They balance the costs of having children against the gains from having a child: o Benefits from child labour and caring during old age o

Costs of mother’s time at home with the children, and educating.

Some Empirical Evidence 

Women’s employment outside the house and higher levels of education have shown lower levels of fertility. o This also shows declines in child mortality and thus further decrease in fertility.

Implications for Development and Fertility



1. Increases in education in women and change in their role and status 2. Increase in female non-agricultural wage employment opportunities will raise cost of their child-rearing activities. 3. Rise in family income through increased direct employment from combined couple earnings – redistributing income from rich to poor. 4. Reduction of infant mortality through public health and nutritional status of mother. 5. Development of old-age + social security systems, to decrease dependence of parents on children. 6. Expanded schooling opportunities so parents can substitute “quality” for quantity. All these social proposals, will not help individual’s development but also motivate the idea of smaller families. – where motivations exists family-planning programs can work.

The Consequences of High Fertility: Some Conflicting Opinions It is NOT a Real Problem   

1. Problem is not population growth but other issues 2. Population growth is a false issues used by DCs to keep LDCS underdeveloped + dependent. 3. For many developing regions, population is in fact desirable

Other Issues



1. Underdevelopment – if efforts are made to higher levels of living, self esteem and expanded freedom; population growth will take care of itself

As long as families stay poor and weak, oversized families will remain the only source of social security for the parents  birth control programs will fail as there is no motivation for them to limit their size. 2. World resource depletion and environmental destruction – population is only a problem in relation to availability and use of scarce natural resources. o Developed countries consume 80% of the world’s resources, with only ¼ of the world’s population. o On average the developed world’s average person consumes 16 times as much as one in an LDC  bearing one child in an LDC is like bearing 16 in a DC o Instead of asking LDCs to bear less children, the DCs should consume less. o High fertility is due to low levels of living largely b/c of DCs overconsumption. 3. Population Distribution – it is not how many people but how they are concentrated in certain regions of the world. Some areas are very underpopulated, others overpopulated (most big cities in LDCs) o Don’t focus on population growth but on rural-urban migration 4. Subordination of Women – it is due to women’s lack of economic opportunity. o Example: Restricted access to birth control increase fertility. o Solution focuses on the empowerment of women. o







It’s a Deliberately Contrived False Issue

   

Another argument denying the important of population growth relies on dependency theory. Overpopulation in poor nations is an attempt from DCs to hold down development of the latter in order to maintain an international status quo. Rich nations want poor nations to hold growth even though they themselves went through a period of rapid population growth. Want to lower the absolute size of poor (racist), b/c they can someday be a serious threat to the welfare of the right white societies.

It’s a Desirable Phenomenon

     

Larger populations provide needed consumer demands to have economies of scale with lower costs, higher output levels and cheaper labour. Neomarxists argue that many rural areas are underpopulated, where arable land is available and could be used if there were people inhabiting there. Rapid population growth has been given in some African countries b/c of large depopulation during the time of colonization and the slave trade. They have been recovering from this. 1. Many countries claim the need for population growth to protect currently underpopulated borders against expansionist intentions. 2. Ethnic, racial and religious groups in LDCs who favour large family size, and be favoured morally and politically. 3. Military and political power maybe seen as dependent on large + youthful populations.

It IS a Real Problem



  



1. The Extremist Argument: Population and the Global Crisis – attributes all the world’s evils to population growth. o Food shortage catastrophes and environmental issues are due to population growth alone. Some extremists say overpopulated countries such as India should have measures such as compulsory sterilization to control family size. 2. The theoretical argument: Population-poverty cycles and the need for Family-Planning programs – too rapid population growth will yield negative economic consequences. It will retard prospects for better life by reducing savings rates at household + national levels o This also reduces gov’t revenues and their investment on rudimentary services such as health and social services to the additional people. They describe it by simplifying the standard Solow growth model o



 Y = rate of GNI growth  L = rate of labour force (population) growth  K = growth in capital stock  A (alpha) = capital elasticity of output  T= Effect of technological change o Assuming constant returns to scale... per capita income growth (Y-L) is proportional to capital-labour ratio (K-L) plus the residual effects of technology. o Low incomes induce families to have more children as a source of cheap labour, although they reduce savings. Thus creating a vicious cycle. o Large families mean lower savings, less investment, slower economic growth and ultimately greater poverty  the CAUSE of underdevelopment. 3. The empirical approach: Seven Negative Consequences of Population Growth o A. Economic Growth: rapid population growth lowers per capita income in most LDCs bringing economic stagnation. o B. Poverty and Inequality: at the household level correlation b/w poverty and family size are highly correlated. It exacerbates both poverty and inequity.  The poor are landless, suffer 1st from cuts on gov’t assistance. Women are thus the ones who suffer the most from bearing many children. o C. Education: large families reduce capacity of parents to educate children. o D. Health: high fertility harms the health of mothers and children. o o

o

E. Food: over 90% of additional LDC food requirements are due to population increases. F. Environment: population growth contributes to environmental degradation: foreast encroachment, deforestation, fuelwood depletion, soil erosion, declining fish and animal stocks. G. International Migration: legal + illegal migration is one of the major consequences of LDCs population growth – excess job seekers... this falls though on DCs.

Goals and Objectives: Toward a Consensus 

    

CONCLUSIONS 1. Population isn’t the primary cause of low levels of living, gross inequities or limited freedom... the causes of such things are in the plight of poor families, specially women and failure of international + domestic development policies. 2. The problem of population is not just numbers but involves quality 3. Rapid population growth intensifies problems of underdevelopment. POLICY GOALS 1. In countries where population growth might be a problem we must deal with the underlying conditions (social + economic) of underdevelopment. 2. Induce motivations to bring smaller families through development; family planning 3. DCs should cut back on unnecessary consumption and making genuine commitments to eradicating poverty, illiteracy, disease and malnutrition in LDCs

Some Policy Approaches     

   

What Developing Countries Can Do Persuade people to have smaller families though media and education. Enhance family-planning programs to provide health and contraceptive services to encourage desired behaviour. Manipulate economic incentives and disincentives for having children. reducing maternity leaves, financial penalties for hacing children beyond a certain number etc.... Government should coerce people into having smaller families through legistlation and penalties. Raise the social and economic status of women and hence create favourable conditions to delay marriage and lower marital fertility – having a reproductive choice What Developed Countries Can Do We must be concerned with the unequal worldwide income distribution of incomes and depletion of non-renewable resources. Simplyfying lifestyles and consumption habits (unlikely policy in richer countries) Genuine willingness to poor countries in their development efforts. o NGOs can help Financial assistance for family-planning programs, public education and national population policy....