DEVELOPMENT ECONOMICS II
BY HIWOT D.A.
CHAPTER ONE
POPULATION GROWTH AND ECONOMIC DEVELOPMENT
1. Population Growth and the Quality of Life
• In 2017, the world’s population was estimated to be 7.6 billion people.
• Projections by the United Nations placed the figure at more than 9.2 billion by the
year 2050.
• Every year, more than 75 million people are being added to the world’s
population. Almost all of this net population increase (97%) is in developing
countries.
The problem of population growth is not simply a problem of numbers. It is a
problem of human welfare and of development.
2. Population Growth: Past, Present, and Future
World Population Growth throughout History
Structure of the World’s Population
• The world’s population is unevenly distributed between developed and
developing nations by: -
Geographic region: More than three-quarters of the world’s people live in
developing countries.
Fertility and mortality levels: Most developing nations have birth rates ranging
from 15 to 40 per 1,000. By contrast, in almost all developed countries, the rate is
less than 15 per 1,000.
Age structures: Population is relatively youthful in the developing world.
Children under the age of 15 constitute more than 30% of the total population of
developing countries but just 17% of developed nations.
The rate of population increase is quantitatively measured as the percentage yearly
net relative increase or decrease in population size due to natural increase and net
international migration.
•Note:
Rate of population increase:- natural increase after adjusting for immigration and emigration.
Natural increase = birth rate - death rate.
Net international migration = immigration-emigration
Crude birth rate (often shortened to birth rate: the number of children born alive each year per
1,000 population.
Death rate: the number of deaths each year per 1,000 population.
Total fertility rate (TFR): the average number of children a woman would have throughout her
childbearing years (15 to 49 years of age).
The Hidden Momentum of Population Growth
• It is the phenomenon whereby population continues to increase even after a
fall in birth rates , because
1. 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.
2. The age structure of many developing countries’ populations.
3. The Demographic Transition
• It is a process by which fertility rates eventually decline to replacement levels.
Demographic transition in Western Europe
Demographic transition for developed countries
• Stage 1: the period before their economic modernization. These countries had
stable or very slow-growing populations as a result of a combination of high birth
rates and almost equally high death rates.
• Stage 2: began when modernization. Here the rate of death is declining but
fertility dose not.
• Stage 3: started when the forces and influences of modernization and
development caused the beginning of a decline in fertility and mortality.
Demographic transition of developing countries
• Stage 1: Both birth rates and death rates were very high.
• Stage 2: occurred throughout most of the developing world, in the 1950s and
1960s. By using highly effective imported modern medical and public health
technologies caused death rates to fall much more rapidly than in nineteenth
century Europe.
• Stage 3: we can distinguish between two broad classes of developing countries.
Case A: modern methods of birth control combined with rapid and widely
distributed rises in levels of living have resulted in death rates falling as low as 10
per 1,000 and birth rates also falling rapidly, to levels between 12 and 25 per 1,000.
Case B: After an initial period of rapid decline, death rates have failed to drop
further, largely because of the persistence of widespread absolute poverty and low
levels of living and more recently because of the AIDS epidemic. Moreover, the
continuance of still quite high birth rates as a result of these low levels of living
causes overall population growth rates to remain relatively high.
4. Causes of High Fertility in Developing Countries
A. The Malthusian Population Trap
• Malthus postulated a universal tendency for the population of a country, unless
checked by dwindling food supplies, to grow at a geometric rate, doubling every 30
to 40 years.
• Because of diminishing returns to the fixed factor, land, food supplies could expand
only at a roughly arithmetic rate.
If per capita income levels became somewhat
larger than (were to the right of) S, it is assumed
that population size will begin to increase in part
because higher incomes improve nutrition and
reduce death rates.
If income per capita were a little less than S, the total
income curve would be above the population growth
curve and so income per capita would be rising.
Criticisms of the Malthusian Model
• The theory is based on a number of simplistic assumptions and hypotheses that do
not stand the test of empirical verification.
1. The model ignores the enormous impact of technological progress in offsetting
the growth-inhibiting forces of rapid population increases.
2. It is 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.
B. The Microeconomic Household Theory of Fertility
• By using the traditional neoclassical theory of household and consumer behavior
with the principles of economics and optimization this model try to explain the
family size decisions.
• The conventional theory of consumer behavior
U=f(Cd, Cx)
•The desired number of children can be expected to vary:
Directly with household income
Directly with the price of other goods
Inversely with the price (cost) of children, and
Inversely with the strength of tastes for other goods relative to children.
The Demand for Children in Developing Countries
• In addition to the determining factors of demand for surviving children's, Children
in poor societies are seen partly as economic investment goods.
• In many developing countries, there is a strong intrinsic psychological and
cultural determinant of family size, so the first two or three children should be
viewed as “consumer” goods for which demand may not be very responsive to
relative price changes.
• In deciding whether or not to have additional children, parents are assumed
to weigh private economic benefits against private costs.
• Recent research on household behavior has led to a major improvement of this
theory. Households in developing countries generally do not act in a “unitary”
manner depicted with this traditional model.
Non-unitary, bargaining-based models of household behavior try to explain the
family decision in developing countries. such as higher investment in husbands’
farm plots than wives’ farm plots even when a more even investment could lead to
higher family incomes.
5. Consequences of High Fertility: Some Conflicting Perspectives
There are two approaches on the consequences of population.
A. It’s Not a Real Problem
• Because: -
1. The problem is not population growth but other issues, like
Underdevelopment
World Resource Depletion and Environmental Destruction
Population Distribution
Subordination of Women
2. It’s a Deliberately Contrived False Issue
3. It’s a Desirable Phenomenon
B. It is a Real Problem
• The Extremist Argument: Population and Global Crisis
• The Population-Poverty Cycle Theory
Other Empirical Arguments: Seven Negative Consequences of Population
Growth
• Reduce Economic Growth
• Increase Poverty and Inequality
• Reduce Education quality
• Reduce Health
• Increase Food supply shortage
• Increase Environmental degradation
• Increase International Migration
6. Consensus and Some Policy Approaches
• The following are the essential components of intermediate or consensus opinion.
1. Population growth is not the primary cause of low levels of living, extreme
inequalities, or the limited freedom of choice that characterize much of the
developing world.
2. The problem of population is not simply one of numbers but involves the
quality of life and material well-being.
3. Rapid population growth does serve to intensify problems of underdevelopment
and make prospects for development that much more remote. High population
growth rates, though not the principal cause of underdevelopment.
Policy goals and objectives regarding population growth
• In countries or regions where population size, distribution, and growth are viewed
as an existing or potential problem, the primary objective of any strategy to limit
further growth must deal not only with the population variable per se but also with
the underlying social and economic conditions of underdevelopment.
• To bring about smaller families through development-induced motivations,
family-planning programs providing both the education and the technological
means to regulate fertility for people who wish to regulate it should be
established.
• Developed countries should help developing countries achieve their lowered
fertility and mortality objectives not only by providing contraceptives and funding
family-planning clinics
What Can Developing Countries Do?
Persuade people to have smaller families through the media and the educational
process, both formal and informal (adult education).
Enhance family-planning programs to provide health and contraceptive services
to encourage the desired behavior.
Deliberately manipulate economic incentives and disincentives for having
children.
Coerce people into having smaller families through the power of state legislation
and penalties.
Raise the social and economic status of women and hence create conditions
favorable to delayed marriage and lower marital fertility.
What Can Developed Countries Do?
• In addition to simplifying their lifestyles and consumption habits, internal policy
that rich nations could adopt to mitigate current world population problems would
be to liberalize the legal conditions for the international immigration of poor,
unskilled workers and their families.
How Can Developed Countries and International Assistance Agencies Help
Developing Countries with Their Population Programs?
• The whole area of research into the technology of fertility control, the
contraceptive pill, modern intrauterine devices (IUDs), voluntary sterilization
procedures, and, particularly in the age of AIDS, effective barrier contraception.
• Financial assistance from developed countries for family-planning programs,
public education, and national population policy research activities in the
developing countries. This has traditionally been the primary area of developed-
country assistance in the field of population.
