The Population Problem: New Debates, New Ideas, and New Opportunities

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Evidence on how Population and Reproductive
Health Impact Economic Growth and Poverty
Reduction David Canning Harvard School of Public
Health November 2, 2006
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Theory and Evidence

• Theoretical models tell us what evidence to look
  for.
• There are many mechanisms that potentially link
  population to growth and poverty reduction.
• Evidence of a narrow focus in the past on the
  effect of population growth rate on economic
  growth.

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Theory Population Effects on economic growth

• Malthusian
• exhaustible resources (climate)
• Neo-classical growth theory
• capital dilution
• Positive scale effects
• technological progress and agglomeration
  externalities

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Impact of population growth on economic growth

• Use cross-national data.
• Standard finding was of little effect of
  population growth on economics growth (NAS Report
  1986).
• Result still holds today.

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The 1986 Report in Historical Context

• The report was revisionist (Kelley 2001) as
  opposed to other population-alarmist reports.
• The authors were economists and allowed for
  market and institutional mechanisms that may
  alleviate the negative consequences of population
  growth.

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Critiques

• We have been looking at the wrong level of
  aggregation. Many effects may occur only at the
  global or city level.
• Other theoretical models would make us look at
  different evidence.
• Test conflates several different effects.

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Other Theories

• Quality- quantity tradeoff
• health and education of children
• Maternal health and productivity
• Female labor market participation
• Transition from family support to saving for old
  age
• Age structure effects
• Labor supply and saving vary with age.
• Differential effects of fertility, mortality and
  migration

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Components of Population Growth

• Population growth can be decomposed into the
  crude birth rate, minus the crude death rate,
  plus inward migration.
• Looking at effects of population growth as a
  whole assumes these components have exactly equal
  effects - the effect of a birth is the same as an
  inward migrant or a death avoided.
• The economic impact of changes the birth rate,
  death rate, and migration rate are likely to be
  very different.

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Mortality and Health

• Low death rates are associated with healthier
  populations evidence has emerged for such an
  effect in both the micro and macro literature.
• It is common to capture health in growth
  regressions by life expectancy
• This health productivity can be separated from
  the population effect

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Demography and Growth

• Low birth rate and low death rate are both
  associated with faster economic growth.
• A high (and rising ) ratio of working age to
  dependent population is associated with economic
  growth.
• The effect is robust in growth models and help
  forecast economic growth.
• Identification timing. Past demography is
  uncorrelated with future growth shocks.

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Age Structure and Accounting

• There is an accounting effect of age structure,
  where we take age specific behavior to be
  constant and look at the effect of a changing age
  pattern.
• This gives large effects of age structure change
  on labor supply and saving.
• Age structure can be written as a function of
  past fertility, mortality and migration rates.

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Demography and Saving

• Investment rates in most countries are closely
  tied to domestic savings rates.
• Savings rates vary with age. Changing age
  structure towards the older working age groups
  (who have high savings rates) tends to increase
  national savings rates.
• Macro effects are larger than those found by
  calibration based on micro data perhaps due to
  the fact that aging populations have longer life
  expectancy generating higher savings rates for
  retirement at all ages.

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East Asia Age Structure
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Sub-Saharan Africa Age Structure
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Interactions

• High rates of growth of the working age
  population produce an increase in labor supply.
• This supply must be met by demand if it is to be
  employed.
• We have evidence that the beneficial effects of
  age structure change only occur in countries with
  good institutions and economic policies
• Estimation different from calibration

21
Poverty Reduction

• Cross country poverty and inequality data is very
  low quality.
• Little evidence of an effect of fertility on
  inequality in macro data (poor get proportional
  benefits).
• Some evidence that demographic transition occurs
  first among the better off, widening income
  inequality.
• The poorer families catch up later in the
  transition.

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Economic Growth, Welfare, and Population Policy

• We find that lower fertility promotes growth in
  GDP per capita. However, GDP per capita is not a
  welfare measure. A broader notion of welfare is
  required.
• If the benefits and costs of fertility fall
  entirely on the family, we should aim to achieve
  desired fertility. We do not have evidence here
  of externalities (need to compare effect within
  and across families).

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Poverty Trap

• The temporary boost in GDP per capita due to the
  demographic transition may help countries escape
  from a poverty trap.
• The feedbacks from income, health and education
  to fertility are a technical problem for
  identifying the direction of causality.
• They are conceptually important in understanding
  the process of development since they set up a
  self reinforcing, positive feedback, system
• Points to research on determinants of desired
  fertility, and the system, as well as the
  consequences of filling unmet need.

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Casual Effects in Microdata

• Determining the effects of mortality, fertility,
  and migration pose quite different problems
• Desired fertility is a choice and is the product
  of a joint decision.
• Random shocks (unplanned births, infertility)
  identify the effect of fertility on behavior.
• Access to family planning for unmet need is a
  good instrument as it is also the likely policy
  intervention.
• Changing desired fertility is likely to have
  different effect from providing services to
  reduce unmet need.

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Micro Evidence

• Large family size is associated with poverty.
• Few studies try to get at causality
• Twins and sex composition (with male preference)
  are not good instruments.

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Microeconomic evidence the economic effects of
lowering fertility determining causality

• Miller, 2005, quasi-random placement of family
  planning services in Columbia, effects of womens
  education and labor supply.
• Joshi and Schultz, 2006, MATLAB family planning
  experiment in Bangladesh, effect on child health,
  womans health, and income.

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Focus Theory

• Which mechanism (theoretical effect) is to be
  focused on?
• Can we determine causality rater than
  association.