Population and Poverty Tom Merrick World Bank Institute August 21, 2002.
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Transcript of Population and Poverty Tom Merrick World Bank Institute August 21, 2002.
Population and Poverty
Tom MerrickWorld Bank Institute
August 21, 2002
Recent research findings:
•Slower population growth creates the potential to increase the pace of aggregate economic growth
•Rapid fertility decline at the country level helps create a path out of poverty for many families
I. Growth
II. Poverty
III. Policy Implications
New Findings on Growth Recent studies of effects of
demographic change on growth help explain the past experience of different countries and regions (slow growth in Africa versus the burst of growth in East Asia, 1960-1995)
The demographic experience of East Asia is good news for countries on a similar path of fertility decline (e.g., Latin America and more recently, Africa)
Population growth rate
time
death rate
The Demographic Transition
Birth rate
birth rate minus death rate
TIME
Population Growth Rate Over the Course of the
Demographic Transition
Population by Age, 1995
0 100 200 300 400 500 600
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80+
Age
Population (millions)
Source: UN 1996
Developed world
Developing world
Age Dependency Ratio by Region
0
0.2
0.4
0.6
0.8
1
1950 1975 2000 2025 2050
Year
Rat
io
Source: UN 1996
Developed world
Asia
L. America
Africa
2000
Changing Age Structure Produces a “Demographic
Bonus” As the gab between birth and death
rates narrows, the ratio of workers to non-workers is unusually high and increasing.
During this demographic ‘bonus time’ more workers are potentially producing more total output, greater wealth accumulation, and an increasing supply of human capital.
The changing age structure is driven mostly by fertility decline.
Population Growth and the Age Structure
Population share at working ages
Population growth rate
time
Ratio of Workers to Dependents
1
1.2
1.4
1.6
1.8
2
2.2
1950195519601965197019751980198519901995
Year
Rat
io o
f W
ork
ers
to D
epen
den
ts
S.C. Asia
East Asia
Latin America
Africa
The Effect On Savings
An increase in the worker-dependent ratio can increase savings and investment
In the case of East Asia, the increase in that ratio and the associated increase in savings can be associated with 1/3 of the total 6% average annual per capita growth rate, 1965-1990
Stylized Model of Economic Growth and the Demographic
Transition
Other Transitional Forces
Demographic Gift
Eco
no
mic
Miracle
Sustainable Growth
Yo
uth
D
emo
gra
ph
ic
Bu
rden
Growth rate of real GDP per capita
C. 1945
C. 1960 Time
C. 2010
C.2025
The Policy Environment Matters
Benefits from a ‘demographic bonus’ depend on the policy context. In East Asia, demand for labor rose rapidly, absorbing rising supply at rising levels of labor productivity. What happened?
1. Fiscal discipline2. Open and competitive markets3. Public investment in education
and health careIn Latin America, the demographic bonus has been less effectively exploited.
Institutions Matter Too
1. Rule of Law2. Property Rights3. Political Stability
Policies and institutions moderate negative effects of rapid population growth, and reinforce positive effects of the demographic bonus.
Higher life expectancy +good policy environment
Technologicalchange
Higher economicgrowth
Lower fertility&
Higher life expectancy
+ good policyenvironment
Higher & sustainedeconomic growth
Reinforcing effects:Endogenous factors can be important
In East Asia, there may have been no ultimate “cause”, only a process
Poverty and Fertility Change On the one hand...
The association of high fertility with poverty does not prove that one causes the other;
Moreover, even if poverty leads to high fertility, that may reflect parents’ sensible decisions to trade off current consumption for greater future family income (when children work or for greater old age security);
So, economists have traditionally hesitated to endorse policies and programs to reduce fertility.
On the other hand...
New studies confirm that fertility at the country level does appear to increase absolute levels of poverty by:
Slowing economic growth and growth-induced poverty reduction
Skewing distribution ofconsumption against the poor
Slowing economic growth & poverty reduction
Household surveys in Brazil show that the decline in poverty associated with what has been a dramatic reduction in fertility is equivalent to what would have been produced by a 0.7% greater annual increase in per capita GDP.
An analysis of 45 developing countries reveals that had the average country reduced its birth rate by 5 per 1000 throughout the 1980s, the average country poverty incidence of 18.9% in the mid-1980s would have been reduced to 12.6% between 1990 and 1995.
Moreover, high fertility may not even be optimal, even for poor families.
• Poor parents have severely constrained choices. The apparent alternative of fewer ‘higher quality’ children does not exist, if public spending on health and schooling is inadequate.
• The poor may lack critical information: The market for information is far from perfect. The poor often lack information on declining infant mortality, increasing returns to schooling, and improving financial markets.
• Men may dominate the choice in # of children, while not fully sharing the costs.
And evidence increasingly suggests:
A higher prevalence of unwanted pregnancies among the poor
A strong response to reduced costs of controlling fertility. (In the last decade, fertility has fallen among the poor and uneducated who had access to health and family planning services.)
So, both theory and improved and expanded empirical efforts support
the likelihood that high average fertility at the country level hurts the poor, and that their own high fertility
can contribute to their and their children’s poverty
Policy Implications
Undo existing policy-induced distortions Ensure economic policies that
strengthen land, labor, and financial markets
Invest heavily in education and health programs
Improve status of women Subsidize voluntary family planning and
information services