Bloom-Williamson (1998)_Demographic Transitions and Economic Miracles in Emerging Asia.pdf

7/22/2019 Bloom-Williamson (1998)_Demographic Transitions and Economic Miracles in Emerging Asia.pdf

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T H E WORLD BANK ECONOMIC REVIEW, VOL. 12, NO. 3: 419-55

DemographicTransitionsand EconomicMiraclesin Emerging Asia

David E. Bloom and Jeffrey G. Williamson

Thedemographic transitiona change from highto lowrates ofmortalityandfertil-ityhasbeen moredramaticinEastAsia duringthe twentiethcentury thaninanyother regionorhistoricalperiod. Byintroducing demographic variablesinto an em-piricalmodelofeconomicgrowth this articleshows that thistransition has contrib-uted substantiallytoEast Asia s so-called economicm iracle. Themiracle occurredinpart becauseEastAsia s demographic transition resultedinitsworking-agepopula-tiongrowingat amuchfaster rate thanitsdependentpopulationduring1965-90thereby expandingthe percapita productive capacityofEast Asian economies. Thiseffectwas notinevitable;rather itoccurred because East Asian countries hadsocialeconomic andpolitical institutionsandpolicies that allowed themtorealizethegrowthpotentialcreatedby thetransition.Theempirical analyses indicatethatpopulationgrowthhasapurely transitional effectoneconomicgrowth;this effect operatesonlywhen thedependentan dworking-age populationsaregrowingatdifferentrates.Theseresults imply that future demographic changewilltendtodepress growth ratesin EastAsia whileitwill promote more rapid economic growthinSoutheastandSouthAsia.

This article has two objectives. The first is to estimate an empirical model thatisolates the impact of demographic variables on economic growth. The second isto use these results to infer how much of the East Asian miracle can be explainedby the region s spectacular demographic transition.1

1.We define East Asiatoinclude China, Hong Kong (China), Japan, the RepublicofKorea, Singapore,and Taiwan (China); Southeast Asiatoinclude Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma),the Philippines, Thailand, andVietnam;andSouth Asia toinclude Afghanistan, Bangladesh, Bhutan,India, theMaldives, Nepal, Pakistan,and SriLanka.

DavidE.Bloom and JeffreyG.WilliamsonarewiththeSchoolofPublic Healthand theDepartmentof Economics, respectively, at Harvard University and with theHarvard Institute for InternationalDevelopment. Theauthors aregrateful for thecomments of participants at several seminarsat theHarvard Institute forInternational Developmentandconferencesat t}ieAsian Development Bank,theWorld Bank,theEast-West Center, Columbia University, Duke University,FEPADE(Fundacion EmpresarialparaelDesarrollo Educativo), Harvard University, Johns Hopkins University,theHarvard InstituteforInternational Development, Massachusetts Institute of Technology, Princeton University, TsukubaUniversity, thePopulation Council, theUniversity ofPennsylvania,and theUniversidad TorcuatodiTelia. They appreciate thecomments byNeil Bennett, Eric Bettinger, John Bongaarts, David Canning,Mark Gersovitz, Frank Harrigan, Allen Kelley, Gerald Keusch, Ronald Lee, Pia Malaney, Andrew Mason,Jacob Mincer, Steven Radelet, Larry Rosenberg, Jeffrey Sachs, Warren Sanderson, and Andrew Warner;the excellent research assistance providedbyEric Bettinger, Taku Imagawa, Lysander Menexes, KarthikMuralidharan, Andrew Noymer, andSze-Tien Quek;and thehelpful comments of three anonymousreviewers.Theresearch reported in this articlewasbegun inconnection with theAsian DevelopmentBank s project Emerging Asia.


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42 0 T HE W O R L D B A N KECONOMIC REVIEW ,VOL. 1 2 , N O . 3

Th e article begins by revisiting the deba te on the impact of popu lation grow thon economic grow th. Pop ulation pessimists believe tha t rapid populatio ngrowth is immiserizing, because it tends to overwhelm any induced response bytechnological progress and capital accumulation (Coale and Hoover 1958 andEhrlich 1968). Pop ulation optimists believe that rapid pop ulation growth al-lows countries to capture economies of scale and promotes technological andinstitutional innov ation (Boserup 1 98 1, Kuznets 1967 , and Simon 1981 ). Re-search culminating in the 1980s cast doubt on both views: investigators showedthat population growth has neither a significant positive nor a significant nega-tive impact on economic growth (Bloom and Freeman 1986 and Kelley 1988).These studies were typically based on cross-country regressions of per capitaincome growth on population growth, controlling for a variety of other influ-ences. As Kelley and Schmidt (1995: 543) put it recently,

Possibly the most influential statistical finding that has shaped the po pu latio nde bate s in recent decades is the failure, in more than a dozen studies usingcross-country data, to unearth a statistically significant association betweenthe growth rates of population and of per capita output.Th is po pu latio n neutralis t finding is surprising, but wh ether it arose becausepopulation has no positive or negative effects on economic growth, because ithas no net effect on economic growth, or because both the pessimists and theoptim ists have misspecified the test remains unclear.

More recent work has decomposed population growth into its fertility andmortality components and examined their independent effects on economicgrowth (Barlow 1994, Bloom and Freeman 1988, Brander and Dowrick 1994,Coale 1986, and Kelley and Schmidt 1995). These studies find that measures offertility, specifically past birth rates, are negatively and significantly associatedwith econom ic grow th, wh ereas the effect of mo rtality is insignificant. Th is mo rerecent work is the direct precursor of this article, insofar as it justifies the de-composition on the grounds that changes in fertility and mortality imply verydifferent changes in the age distribution and points toward our hypothesis thatpopulation growth affects economic growth insofar as it affects the ratio ofworking-age population to dependent population. Population growth attribut-able to improvements in longevity among the elderly should have an immediatenegative effect on economic growth, because this implies a greater number ofelderly to support. Population growth attributable to a general decline in mor-tality has no effect, because the ratio of the economically active population todependents stays the same. Population growth attributable to a rise in fertilityshould have an immediate negative effect on economic growth, given the pres-ence of more mouths to feed, and so should population growth stemming froma fall in infant mortality. These latter demographic effects will, however, have adelayed positive impact on economic growth, because the economically activepopulation will boom two decades later.


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Bloom and Williamson 421

This article contributes to the population debate in four ways. First, likeKelley and Schmidt (1 995), it uses the new empirical m odels of economic gr ow thto isolate the effects of dem ograp hy. It does this by incor poratin g dem ographicvariables into a growth model similar to the one used in Asian DevelopmentBank (1997) and Barro and Sala-i-Martin (1995). Second, it explores the pos-sibility of reverse causality between economic grow th an d dem ographic changeby using a two -stage specification in which instrum ents for the grow th rate ofthe population are used to correct for possible endogeneity. Third, it intro-duces demography into the growth equations in a theoretically more appeal-ing wayby adding the growth rates of the total population and the economi-cally active population rather than by simply including birth and death rates.This allows population growth to affect economic growth both by its overallrate of increase and by its effect on the age structure. The distinction matters.Finally, the article highlights how changes in the growth of labor force percapita, changes in the savings rate, and changes in the investment rate arethree plausible channels through which a changing age structure might affectthe rate of economic growth (Bloom and Williamson 1997 and Higgins andWilliamson 1997).

The article uses the econometric results to assess the extent to which popula-tion dynamics may account for a significant portion of East Asia's economicmiracle. East Asia is an excellent context in which to examine this effect forseveral reasons. It has experienced a more rapid demographic transition thanany other region at any time in history. We argue that the initial fall in infantmortality, which set the demographic transition in motion, was likely to havebeen exogenous in late twentieth century East Asia. East Asia has also experi-enced higher sustained rates of economic growth over the past 30 years than anyother region a t any other time in history. East Asia is often com pared with South-east and South Asia, whose demographic transitions either began later or pro-ceeded more slowly and whose recent economic progress has not rivaled that ofEast Asia. And analysts have badly neglected the potential role of populationchange in economic performance in the region, a neglect illustrated best by theWorld Bank's oft-quoted work The East Asian Miracle (1993). In redressingthis imbalance, the article compares Asia with the rest of the world and Asia'ssubregions with one another.

Section I describes the dem ograph ic tran sition in m ore detail, focusing o n thedifference between the experiences of Western Europe and Asia to show thatdemographic effects have been much more pronounced in Asia. Section II de-scribes the model and the recent literature on economic growth on which it isbased. Section III presents the econometric results, and section IV uses thoseresults to estimate just how much of the East Asian miracle may be accountedfor by demographic dynamics. Section V discusses labor supply and capital ac-cumulation, the most likely channels through which population dynamics affecteconomic growth. Section VI concludes with an agenda for future research.


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42 2 THE W O R LD BA N K EC O N O M IC R EVIEW , V O L. 1 2, N O . 3

I. TH E DEMOGRA PHIC TRANSITION AND ECONO MIC GRO WT HThe demographic transition describes the change from preindustrial high fer-tility and m ortality to p ostind ustrial low fertility and m ortality . Figure 1 offers a

stylized view of the transition. Declines in mortality mark the beginning of al-most all demographic transitions, and changes in the age structure are exacer-bated because infants and children enjoy most of these early declines in mortal-ity. True, the improved survivor rates for children induce parents to reduce theirfertility. If pare nts adjusted completely and immediately, there wo uld be no yo uthglut and no acceleration in population growth. But they do not: they adjustslowly, and the you th glu t is large and persistent. After a lag, how ever, fertilitybegins to decline, which m arks the next stage of the transition. Th e pop ulationgrowth rate is implicit in the first panel of figure 1 as the difference betweenfertility and mortality. The second panel makes the population dynamics ex-plicit: the demograph ic transition must be accompanied by a cycle in po pula tiongrowth andthe age structu re. Figure 1 and th e rest of this article treat the d em o-graphic system as if it were closed and thus ignore external migration. If it werequantitatively important and responded to cohort gluts and scarcities, externalmigration might very well mute the impact of demographic transitions. In thelate twentieth century, international migrations are simply not great enough tomatter except, perhaps, for the United States and some oil-producing countriesin the Middle East (Bloom and Noor 1997). They mattered a great deal, how-ever, in the age of relatively unrestricted mass migration prior to World War I(Williamson 1998).These components of the demographic transition might have separate influ-ences on economic growth. The population growth rate could influence eco-nomic growth for the reasons cited by population pessimists or optimists. Thedem ographic transition could also affect economic growth throu gh the age dis-tribution , as we emphasize. Coale and Hoo ver (1958) m ade the dependency ratethe centerpiece of their analysis of the impact of large youth cohorts on savings,investment, and educational capital deepening. Because they were, by virtue ofthe decade in which they conducted their analysis, constrained to study only thefirst burden phase of the Asian demographic transition, they could notdevote attention to the gift phase from the mid-19 60s to the present thatdrives this analysis. Ov erall, the age distribu tion effect will op erate first to low er,then to raise, then to lower again the ratio of the economically active populationto the total popu lation and thu s will have a transitional impact on g rowth of thelabor force per capita. No te tha t the demo graphic gift in the middle phase ofthe transition may or may not be realized. It represents a growth potential whoserealization depends on other features of the social, economic, and politicalenvironment.

Like industrial revolutions, demographic transitions take many decades tocomplete, but in the case of postwar East Asia it has been much faster than itwas in nineteenth century Europe. Over a century and a half, Europe slowly


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Bloom and Williamson 423Figure 1. Demographic Transition and Population Growth

D emographic transition

Birth rateDeathrate

Populationgrowth rate

Birth rateDeath rate

-Time

P opulation growth and the age structure

Birth rateminusdeathrate

Share,.' ' working

Percent inworkforce

Time

improved its understanding of and practices with respect to basic sanitation,management of solid waste, provision of clean drinking water, and the elementsof sound nutrition. It invested in these measures to reduce mortality and chronicm alnu trition and eventually eliminated famines (Fogel 1994). It cleaned up w hatVictorian reformers called killer cities (Williamson 1990 ). These factors, to-


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4 2 4 THE W O R LD BA N K EC O N O M IC R EVIEW , V O L. 1 2, N O . 3

gether with the advent of antibiotics and vaccines and recognition of the impor-tance of preventive medicine, led to a gradual decline in mortality in Europe.Infant and child mortality led the decline because the very young, like the el-derly, are most vulnerable to infectious disease, and because children are farmore numerous than the elderly at early development stages, the decline in in-fant and child mortality matters most. The fertility rate also declined, butmoreslowly, and the European demographic transition stretched out for more than100 years (Coale and Watkins 1986).

The health investments and medical technologies that had been developedand put into practice ih Europe did not exist in Asia until relatively recently.Th ere was a large gap .between the best health practices prevailing in in dustrial-ized Europe and local health practices prevailing in Asia, and by 19 40 th e scopefor the transmission of health technologies was enormous, having been pent upby deglobalization, tw o w orld w ars, the Great D epression, and w ars of colonialliberation. When the postwar transfer of this pent-up health technology finallytook place, it happened in a rush. The process was sped up even further byinvestment in health-improv ing social overhead, which was heavily financed bywo rld funding agencies that did no t exist prior to the 194 0s. In sho rt, the possi-bilities for Asia to catch up with the West in terms of health and demographywere enormous in the late 1940s, and they were driven by factors external toAsiaitself.In the half century since then , Asia has exploited the catch -up poten -tial with such enthusiasm that it has produced one of the fastest and most dra-matic demographic transitions ever. The language we use in this section is pur-posely similar to that used in the debate ab ou t economic catch-up and convergence(Abramovitz 1 986, Barro 1 99 1, Baumol 198 6, and Sachs and W arner 1995), be-cause we think th at exactly the same reasoning applies to the demo graphic tran-sition in Asia.

Asia's demographic transition followed the stylized model by starting with adecline in mortality rates. By the late 1940s, the crude death rate had begun todecline very rapidly throughout much of Asia. The decline proceeded most rap-idly in East Asia (figure 2) and was accompanied by an increase in life expect-ancy from 61.2 to 74.6 years from 1960 to 1992. Similar declines occurred inSoutheast and South Asia, where life expectancy improved from 51.6 to 67.2years and from 46 .9 to 60 .6 years, respectively. In the 1 950s and 196 0s, most ofthe aggregate decline in mortality w as driven by declines in m ortality am ong theyoungest cohorts (Bloom and Williamson 1997).There are a number of possible explanations for the rapid decline in childm ortality in Asia in the middle of this century. One p ossibility has already beensuggested: that is, in the 1940s Asia escaped from some four or five decades ofrelative isolation, ushering in an era of transfer and diffusion of new publichealth programs, technologies, and techniques. For example, the medical ad-vances that were implemented in postwar Asia had been accumulating on the

technological shelf for at least two decades: penicillin was discovered in 1927,sulfa drugs in 193 2, and b acitracin in 1 94 3; streptomy cin was isolated in 194 3


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Bloom and Williamson 42SFigure 2. Crude Death Rate, by Subregion in Asia, 1950-2020Number of deaths per 1,000 population

45

40

35

30

25

2015

10

1950 I960 1970 1980 1990 2000 2010 2020Source: United Nations (1994).

1

-

East i ,sia\i

,SoutJ east i>

ass*--i

2010 2020


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42 8 THE W O R LD BA N K ECO N O M I C R EVIEW , V O L . 1 2, N O . 3

efit to incremental government investments in family planning in countries withwell-established programs.The pace and timing of the demographic transition have led to enormouslydivergent trends in population growth and age structure across Asia. Figure 5plots the ratio of the working-age pop ulation to the nonworking-age pop ulationfor the three subregions in Asia. With only two precocious exceptions, Japanand Sri Lanka, Asia's surge to peak youth dependency rates occurred in the1960s and 1970s, reflected in figure 5 by the low ratio of working-age popula-tion to nonworking-age population in those decades.As figure 5 dem onstrates, the ratio of working-age population to n onw orking-age population has been rising in Asia since 1970, but this increase was espe-cially dramatic in East Asia between 1975 and 1990. According to the UnitedNations (1991) projections, the ratio of working-age population to nonwork-ing-age popu lation will peak in East Asia in 20 10 , ending the second ph ase of its

demographic transition. With the exception of Japan, the elderly dependencyrate has been mostly irrelevant to Asia in this century, even to the more eco-nomically mature East Asia. It will, of course, become very relevant to theseolder tigers as they enter the next century. Indeed, figure 5 projects a decline inthe ratio of the working-age to the nonworking-age population after 2010 (thethird phase of the demographic transition). This reflects the increase in the el-derly dependency rate as the bulge in the age distribution works its way throughEast Asia's population pyramid. However, the elderly dependency rate is notexpected to become a dominant demographic force anywhere else in Asia evenas late as 20 30 .

Figure 5. Ratio of Working-agetoNonworking-age Population in Asia,1950-2030

1950 I960 1970Source:United Nations (1994). 1980 1990 2000 20102020 2030


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In this article, we seek to measure the effects on economic performance ofpopulation growth and of changes in age structure. Population growth is ex-pected to influence economic growth through the channels discussed in the stan-dard debate between optimists and pessimists, such as economies of scale orreductions in the capital-labor ratio. This article, however, argues that in theearly stages of the demographic transition, rising youth dependency burdensand falling shares of working-age adults diminish the growth of per capita in-come. As the transition proceeds, falling youth dependency burdens and risingshares of working-age adults promote the growth of per capita income. Theearly burden of having few workers and savers becomes a potential gift: a dis-proportionately high share of working-age adults. Later, the economic gift dissi-pates, as the share of elderly rises.

If this framework is correct, then some of the slower growth prior to 1970can be attributed to East Asia's very heavy youth d ependency bu rden , which, byitself, was depressing growth rates. Without the youth dependency burden, sothe argumen t goes, East Asia wou ld have had h igher growth rates prior to 197 0.As East Asia graduated from dem ographic burden to gift, the youth dependencyburden decreased and the proportion of working-age adults increased. The re-sult wa s an acceleration of the economic gro w th rate due to demo graph ic forces.This and other transitional forcesproductivity gains from bo rrow ing for-eign technologies, from shifting labor from sectors with low productivity (agri-culture) to sectors with high productivity (industry and services), from exploit-ing the potential of globalization pushed the gro wth ra te far above its pre-197 0level to the m iraculo us rates of the past quarter century. The dem ographictransition accounts for a decrease in the growth rate associated with high youthdependency b urdens and a subsequent rise in the growth rate stemming from theemergence of the demographic gift. Some time in the near future, however, EastAsia's demographic gift will dissipate, and, consequently, economic growth willtend to slow as the share of elderly in the population increases. Once the demo-graphic transition is complete and the p opu lation age structure stabilizes, popu-lation growth will affect economic growth only insofar as it operates throughlevel effects. Hence, any economic effect due to the changing age distributionwill be temporary.

Figure 6 offers a stylized version of the economic hypothesis in which thesustainable growth rate is taken to be about 2 percent a year. Note, however,that the contribution of the demographic transition to the East Asian miraclewill also depend on how the miracle is defined. If it is defined as a share ofper capitaGDPgrowth between 1960 and 2010 (as in figure 6), then the demo-graphic transition accounts for about one-third of the miracle. If it is definedas the surplus over the sustainable rate , then the transition accoun ts for alm osthalf, while if it is defined as the increase in growth rates from 1945-60 to1960-2010, then the transit ion accounts for almost three-quarters . What fol-lows is a test of the hypothesis and a defense of the magnitudes suggested byfigure 6.


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43 0 T HE W O R L D B A N K EC O N O M IC R E VIE W , V O L . 1 2 , N O . 3

Figure 6.Stylized Model of Econom ic Grow th and the Dem ographic Transitionin East Asia, 1945-2025Growth rate of real GDP per capita

c. 1945

II. T H E THEORETICAL FRAMEWORKThe cross-country growth equations estimated in the next section are derivedfrom a conventional Solow-Swan model of economic growth (Barro and Sala-i-Martin 1995). The Solow-Swan model is a special case of the Ramsey modelwith fixed savings rates. Ho wev er, the empirical estimation eq uation derived bythe log-linear appro xim ation arou nd the steady state is identical in both m odels.Competitive firms take wages and the interest rate as given and produce thesame good. The savings rate is fixed and exogenously determined. Workers areidentical. If we assume th at prod uction per worker (y) takes the form y Aka,where A is an index of total factor productivity, a is the output elasticity ofcapital, and krepresents capital stock per work er, then we can derive equ ation 1for the growth rate of y. Equation 1 will be familiar to anyone who has read acurrent advanced macroeconomics textbook (for example, Barro and Sala-i-Martin 1995). It is also consistent with the empirical growth literature, espe-cially that which focuses on conditional convergence (Barro 1991, Barro andLee 1994, Mankiw, Romer, and Weil 1992, and Sachs and Warner 1995).2In2.For an alternative framework within which to model the demographic transition, see Ehrlich andLui (1991). Using an overlapping generations model, they show that utility-maximizing individuals will


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the Solow-Swan model , th e average growth rate (g y)of o u tp u t p e rwo rk e r b e-tween a n yt ime7 \ and T2ispropor t iona l to thenatu ral loga ri thm ofthe rat ioofincome p e rwo rk e r in thesteady state (y ) a n dincome p e rwo rk e r a tt ime 7 \ asfollows:

ffiil hj1) g 7 =W e add tw o m odifications to this mo del. The first involves the form ulation ofsteady-state out pu t. As in Asian Developm ent Bank (19 97), we assume that y isformed as

2) y* = X pwhere X is a matrix with k determinants of the steady state. We also followAsian Development Bank (1997) in our selection of the variables to include inX. These variables are average years of second ary schooling in the initial period(in natural logs), life expectancy in the initial period, a measure of naturalresource abundance, a measure of openness, an index of institutional quality,average government savings, and geographic variables indicating the ratio ofcoastline to land area, whether there is access to major ports, and whether thecountry is located in the tropics.

The second modification involves changing the model from outp ut per w orker(y ) to output per capita (y). We note that. . . . Y Y L L( 3 )

whereN is the total population, L is the number of workers, andy is outp ut percapita. This expression can easily be converted to growth rates,v / o y ~ 6 y * Sworkers ~ 5populationWhen equations 1 and 2 are substituted into 4 and a stochastic term is added,the estimation equation 5 emerges:

9 = x n , +y(T1)n2+ gworkm n 3+ gpopuu,donn 4+ e.choose to have fewer children in response to an exogenous decline in mortality rates. The resultantinvestment in the quality, instead of in the quantity, of children can push a country onto an endogenousgrowth path, leading to higher growth rates. Meltzer (1995) includes health along with education as afactor of production in a standard Ramsey growth model. When fertility rates are endogenous, anexogenous decline in mortality can be shown once again to set the economy on a path of sustainedeconomic growth with a parallel decline in population growth.


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Table 1. Variable Definitions and Selected Descriptive StatisticsVariable Source M ean Standard deviationMinimum MaximumPopulation growth rate, 1965-90Growth rate of economically active

population, 1965-90Growth rate of population under age 15Growth rate of population over age 64Growth rate of the dependent populationAverage birth rate, 1967-87Average death rate, 1967-87Average infant death rate, 1967-87Average noninfant death rate, 1967-87L ogG P per capita as a ratio of U.S.G P per

capita, 1965Log years of secondary schooling, 1965(average years of secondary school forpopulation age 25 or older)Log life expectancy, 1960N atural resource abundance (share ofprimary product exports in G P in 1971)A ccess to ports dummy (indicating if thecountry is landlocked)O pennessTropics dummy (indicating if country islocated between the tropics)R atio of coastline to land areaGovernment savings as a share ofGDP, 1970-90Quality of institutions (index of quality ofgovernmental institutions)

W orld Bank dataWorld Bank dataWorld Bank dataWorld Bank dataWorld Bank dataWorld Bank dataWorld Bank dataWorld Bank dataWorld Bank dataW orld Bank data .

Barro and Lee (1994)World Bank dataWorld Bank data

Sachs and Warner (1995)World Bank dataWorld Bank dataWorld Bank dataKeefer and Knack (1995)

1.882.171.112.621.4630.8911.682.549.03

- 1 . 6 5

-0.704.020.100.130.450.510.301.446.11

1.001.031.530.981.1712.565.042.523.210.91

1.150.220.090.340.450.480.963.432.42

0.170.25-1.430.79

-0.4013.75.150.123.87- 3 . 3 4

-4.833.470.000.00.00.00.0

-5.242.27

3.493.633.695.733.5553.928.859.7019.550.00

1.264.300.511.01.01.07.33

12.579.98

Note:The database is available from the authors upon request.


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Theo retically, one wou ld ex pect th at II3 = - FU = 1, which implies tha t for astable population, where the growth rate of the work force equals the growthrate of the population, net demographic effects should vanish. If the populationis unstable, as it is during a dyn amic transition, then demography might ma tter.This formulation takes age structure into account by focusing on both the totalpopulation and the working-age population. Bloom, Canning, and Malaney(forthcoming) extend this approach to account for the age structure of theworking-age po pulation , which may be impo rtant insofar as productivity variesover the working life cycle. Their model can be generalized to take account ofother productivity-related characteristics as well.It is possible as well that both population growth and growth in the laborforce migh t affect the steady-state rate of income gro wth . The Solow-Swan mod elposits an exogenous rate of growth of workers n. This is presumed to have anegative effect on the steady-state level of income per worker through reduc-

tions in the capital-labor ratio and hence on the rate of growth of income perwo rker. H owev er, once demo graphic factors are incorporated, an increase in nrelative to population growth will also reduce the dependency ratio. Accordingto C oale and H oo ve r's (1958) h ypo thesis, this leads to increases in the per capitarate of savings, which will offset, and possibly even reverse, the negative effectof labor gro wth on the capital-labo r ra tio . If the increase in savings is mo re th anprop ortion al to the growth in labor, then increases in nwill lead to a rise in thesteady-state rate of grow th. Alternatively, if it is less than pro po rtio na l, the capi-tal-labor ratio will decline and the steady state will fall. These effects on growthrates are not identified separately in our model and will be absorbed into thecoefficient on gworker.>potentially causing it to deviate from 1 in ma gnitu de. Th ecoefficient on gpopuition will a l s o absorb any influences of population growth onthe steady-state rate of economic growth, as discussed in the debate betweenpopulation optimists and pessimists. To the extent that these influences are im-portant, the coefficient on ^population may deviate from 1 .III . ECON OM ETRIC RESULTS

The econometric analysis is based on 78 Asian and non-Asian countries cov-ering the qua rter century from 196 5 to 1 99 0. It includes every country for whichall the d ata exist. Tab le1provides a complete description of the data w ith sources,and the appendix provides a list of the countries.

We start by asking whether the level of population growth affects economicgrowth, because the population debate has always been couchederroneouslywe believein those terms. The results appear in table 2. Most of the recentresearch on econom ic convergence has focused on the sign of the coefficient onlogged initial income. If the coefficient is negative, the model predicts condi-tional convergence, thatis,after controlling for factors th at determine the steady-state level of income, poor countries tend to grow faster and approach theirsteady-state level more quickly than rich countries. Consistent with recent re-


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43 4 THE W O R LD BA N K EC O N O M IC R EVIEW , V O L- 1 2, N O . 3

Table 2. The Impact of Population Grow th and Other Factors on EconomicGrowth, 1965-90VariablePopulation growth rate, 1965-90G P per capita as ratio of U.S.G P per capita,1965 (logged)L og life expectancy, 1960Log years of secondary schooling, 1965N atural resource abundanceO p en nessQuality of institutionsA ccess to ports dummyA verage government savings rate, 197 0-9 0Tropics dummyR atio of coastline to land areaConstantA djusted R2

a0.16(0.20)

- 1 . 5 0(0.25)

0.82(0.18)- 4 . 6 8(1.35)2.23(0.47)0.21(0.10)- 0 . 6 8(0.39)0.18(0.04)

- 2 . 1 1(0.92)0.69

b0.56

(0.16)- 2 . 3 0(0.22)5.81(0.98)0.37(0.15)- 2 . 4 0(1.17)1.88(0.36)0.22(0.07)- 0 . 8 7(0.29)0.15(0.03)- 1 . 0 9(0.33)0.29(0.12)- 2 7 . 3 8(4.3)0.83

Note: The dependent variable is the growth rate of realG P per capita in 1965-90 in purchasingpow er parity term s. Estimates are from ordinary least squares. The sample size is 78 econom ies (see theappendix). Standard errors are in parentheses.Source: A uthors' calculations.

search on economic convergence, we also find conditional convergence in oursample. Our focus, however, is on the rate of population growth. In the firstspecification in table 2 (column a), there is no significant relationship betweenpop ulation g rowth and gro wth of gross domestic prod uct GDP)per capita, therebysupporting the neutralist position. However, this result is sensitive to the speci-fication. As soon as log life expectancy in 196 0 and tw o variables con trolling foreconomic geography are added, po pulation is shown to have a positive and sig-nificant impact on growth of GDP per capita (table 2, column b), thereby sup-po rtin g the optim ists' positio n. Thro ug ho ut this section, and specifically in tables2 ,3 , 4 , 5 and 6, we report bo th specifications. Specification a always refers to amodel that excludes initial life expectancy and two geographical variablesatropics dummy and a ratio of coastline to land area. Specification b always in-cludes these three variables.

Table 2 illustrates the kind of analyses that economic demographers haveundertaken to examine the connection between demography and economic


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growth. It seems plausible, however, that both the sources of population growthand the stage of the demographic transition do matter: both a decline in childmo rtality and a baby boom raise the share of young dependents in the popula-tion; a decline in mortality among the elderly increases the share of the retireddependent age cohort; immigration raises the working-age population (becauseit self-selects young adults); and improved mortality among the population atlarge has no impact on age structure at all. Because an economy's productivecapacity is linked directly to the size of its wo rking-age pop ulatio n relative to itstotal population, distinguishing between the two components when exploringthe impact of demographic change on economic performance seems natural andworthwhile.Tab le 3 conforms to these notio ns: the gro wth rate in the economically activepopulation joins population growth in the regression. The growth rate of theworking-age population measures the change in the size of the population ages

15 to 64 between 1965 and 1990. Table 3 confirms that the growth of theworking-age population has a powerful, positive impact on growth ofGDP percapita, while growth of the total population has a powerful negative impactafter controlling for other expected influences. Consider the results reported incolumn lb of table 3. The coefficient on the growth rate of the working-agepopulation is positive, statistically significant, and large in magnitude: an in-crease of 1 percent in the growth rate of the working-age population is associ-ated with an increase of 1.46 percent in the growth rate of GDP per capita. Thecoefficient on the growth rate of the total population is negative, statisticallysignificant, and almost as large: an increase of1percent in the grow th rate of theoverall population (effectively, the dependent population, since the empiricalspecification holds fixed the grow th rate of the working-ag e pop ulation ) is asso-ciated with a decrease of 1.03 percent in the growth rate ofGDP per capita. Thecoefficients of the other variables are similar to those found in Asian Develop-ment Bank (1997) and Radelet, Sachs, and Lee (1997). Columns 2a and 2b oftable 3 show w hat h appens when the impact of the grow th rate of the wo rking-age population and that of the entire population are constrained to be equal, butof opposite sign. In steady state, when the age distribution is stable, populationgrowth will not matter in either of these two specifications. In transition, whenthe age distribution changes, population growth does matter. The coefficienthere is large, positive, and significant. Thus, in our sample, where the growthrate of the economically active population exceeds that of the overall popula-tion, higher growth rates ofGDP per capita have appeared (ceteris paribus). Theopposite is true if the growth rate of the total population exceeds that of theeconomically active population. If the dependent population is growing morerapidly than the work force, the estimates provide evidence of slower growth.

Previous contributions to the population debate typically failed to explore thepossibility of reverse causality between po pulatio n grow th and econom ic grow th,despite a literature suggesting that economic events can induce demographicresponses. While table 3 uses ordinary least squares (OLS), table 4 reports the


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43 6 THE W O R LD BA N K ECO N O M IC R EVIEW , V O L. 1 2 , N O . 3

Table 3. The Effects of Growth in the Population and the EconomicallyActive Population on Economic Growth, 1965-90VariableGrowth rate of economicallyactive population, 1965-90Population growth rate,1965-90Difference in growth rates*GDP per capita as a ratio of U.S.GDPper capita, 1965 (logged)Log life expectancy, 1960Log yean of secondaryschooling, 1965Natural resource abundanceOpennessQuality of institutionsAccess to ports dummyAverage government savingsrate , 1970-90Tropics dummyRatio of coastline to

land areaConstantAdjusted R 1F ( l , 6 8 ) b 0.22;Fd , 64)

la1.95(0.38)

-1 .87(0.43)

-1 .36(0.21)

0.50(0.16)^ . 8 6(1.2)2.06(0.40)0.23(0.08)- 0 . 3 5(0.34)0.14(0.03)

-2 .46(0.79)0.76Prob > F =

lb1.46(0.34)

- 1 . 0 3(0.40)

-2 .00(0.21)3.96(0.97)0.22(0.14)- 2 . 3 5(1.0)1.92(0.32)0.20(0.07)- 0 . 6 4(0.27)0.12(0.03)- 1 . 3 1(0.30)0.24(0.11)-19 .5(4.3)0.860.64 9.03;Prob >F =

2a

1.97(0.38)-1 .39(0.21)

0.50(0.16)-4 .86(1.1)2.00(0.38)0.22(0.08)- 0 . 3 1(0.32)0.14(0.03)

-2 .28(0.69)0.780.003

2b

1.68(0.35)- 1 . 9 7(0.22)2.94(0.97)0.28(0.14)- 2 . 5 7(1.1)1.72(0.33)0.15(0.07)-0 .40(0.27)0.13(0.03)-1 .20(0.31)0.23(0.12)- 1 4 . 3(4.1)0.85

Note: The dependent variable is the growth rate of realGDP per capita in 1965-90 in purchasingpow er parity terms . Estimates are from ordinary least squares. The sample size is 78 economies (see theappendix). Standard errors are reported in parentheses.a. Growth rate of the economically active population minus growth rate of the total population,1965-90.b.Test of the null hypothesis that the population growth rate equals the negative of the growth rateof the economically active population between 1965 and 1990.Source:Authors' calculations.

results when an instrumental variables (rv) estimator is used to account for pos-sible reverse causality. The instruments include lagged population growth, loglife expectancy in 1960 (in columns la and 2a), population policy indicators,and information on the religious composition of the population. Because theinstrum ents chosen are available only for a smaller sample of coun tries, the OLSestimates corresponding to this sample are also included in the table. The cou n-tries excluded from the smaller sample can be found in the notes to table 4. Incolumn lb of table 4, the coefficients on the growth rates of the working-age


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Table 4. Instrumen tal Variables Estima tes of the Effects of P opulationGrowth on Economic Growth, 1965-90VariableGrowth rate of economically active

populat ion, 1965-90Instrumental variablesOrdinary least squares

Population growth rate, 1965-90Instrumental variablesOrdinary least squares

Difference in growth rates'Instrumental variablesOrdinary least squares

R2 from first-stage regressionF-test for joint significance of instrumentsin first-stage regression (ndf, ddf)

Hausman specification test(chi-square with df )

la

3.83(0.82)1.95(0.40)- 4 . 1 9(0.96)- 1 . 9 3(0.45)

0.962.59(9 , 52 )7.13(10 df )

lb

1.37(1.71)1.41(0.37)- 0 . 9 2(2.12)- 0 . 9 7(0.43)

0.960.26(8 , 50 )0.00

(13 df )

la

3.28(0.65)1.95(0.40)0.542.59

(9 , 52 )6.58(9df)

lb

2.96(0.75)1.60(0.38)0.540.26

(8 , 50)4.47(12 df )

Note: The dependent variable is the growth rate of realGDP per capita in 1965-90 in purchasingpower parity terms. Instruments in the first-stage regression include average growth of population in1950-60, log life expectancy in 1960 (in columns la and 2a), urban share of the population in 1965,population policy variables including attitudes toward fertility and population growth and whether agovernment agency exists to design and implement po pulation policy, and dummy variables for economieswhere a majority of the population is Islamic or is Judeo-Christian. The regressions in columns la and2a also include the additional variables in column a of table 2. The regressions in columns lb and 2binclude those in column b of table 2. The sam ple size is 70 econom ies (see the app endix ). The followingeconomies are not included in the data set used to calculate the estimates reported in this table due tomissing data: Botswana, H aiti, Hong Kong (China), Niger, Singapore, Taiwan (China), Tanzania, andZaire. Standard errors are in parentheses.

a. Growth rate of the economically active population minus growth rate of the total popularion,1965-90.Source:A uthors' calculations.

and the total population are similar to the OLS estimates: an increase of 1 per-centage point in the growth rate of the working-age population is associatedwith an increase of 1.37 percentage points in growth ofGDP per capita, and anincrease of1percentage poin t in the grow th rate of the total pop ulatio n is asso-ciated with a decrease of 0.92 percentage point of growth in GDP per capita. Incolumn lb, theIVestimates, with high standard errors, lack the precision of theOLSestimates, but in columns la , 2a, and 2b , theIV estimates yield more preciseestimates. As can be seen from columns 2a and 2b in table 4, when the coeffi-cients on the growth rate of the economically active population and total popu-


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43 8 THE W O R LD BA N K ECO N O M I C R EVIEW , V O L . 1 2 , N O . 3

coefficients are almost twice as large as theirOLS counterparts. All of the con-strained estimates are statistically significant at all conventional levels. The simi-larity of the signs and significance of these estimated coefficients across the al-ternative specifications and estim ation techniques speaks well for the robus tnessof the result.Hausman specification tests (Hausman 1978) were performed to test for con-sistency of theOLSestimates. The test statistics, reported in each column of table4 ,suggest that, in both the constrained a nd u nconstrained versions of the mode l,one c ann ot reject the null hypothesis th at the IV andOLS estimates are statisti-cally equivalent. Although the data do not provide evidence of an endogeneityproble m, F-statistics rep orted in table 4 reveal that the instrum ents are no t jointlysignificant in column s l b and 2 b. Lagged life expectancy is the instrum ent doingall the work in columns la and 2a, but its validity as an instrument is itself notbeyond question. Thus theIVestimates do not p ermit us to dismiss the possibil-ity of reverse causality. Furth er analysis is clearly w arra nte d.

Table 5 reports the results when interaction terms and regional controls areincluded. Th e table addresses tw o issues. Is the effect of demo graphic c hange onTable 5. Alternative Specifications of the Effects of Pop ulation Grow thon Economic Growth, 1965-90VariableGrowth of economicallyactive population, 1965-90Population growth rate,1965-90Interaction between growthof economically activepopulation and institutionalqualityInteraction between growthof economically activepopulation and opennessAsia dummyNorth America dummySouth America dummyEurope dummyConstantAdjusted R 2

la1.94(0.66)

- 1 . 8 7(0.45)0.002(0.07)

- 2 . 4 3(1.35)0.77

lb1.36(0.55)

- 1 . 0 1(0.41)0.01(0.06)

- 1 9 . 3(4.3)0.86

2a2.03(0.43)

-1 .88(0.43)

- 0 . 1 2(0.31)

-2 .62(0.89)0.77

2b1.43(0.39)

-1 .02(0.40)

-0 .05(0.25)

-19 .6(4.3)0.86

3a1.91(0.45)

-1 .72(0.49)

0.81(0.44)0.36(0.67)0.08(0.49)1.00(0.60)- 2 . 8 9(1-20)0.79

3b1.24(0.40)

-0 .78(0.45)

0.60(0.35)0.67(0.55)0.35(0.42)0.53(0.50)-20 .19(4.4)0.86Note: The dependent variable is the growth rate of realGDP per capita in 1965-90 in purchasingpower parity terms. Estimates are from ordinary least squares. The regressions in columns la, 2a, and3a also include the additional variables in column a of table 2. The regressions in columns lb, 2b, and

3b include those in column b of table 2. The sample size is 78 economies (see the appendix). Standarderrors are in parentheses.Source:Authors' calculations.


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econom ic performan ce cond itioned by key policy variables such as institutio nalqua lity and ope nnes s ? And does gro w th in Asia respond differently to de-mographic and economic conditions than growth in other regions? In columnsla, lb, 2a, and 2b the unconstrained versions of the model are reestimated byincluding interactions between the growth rate of the economically active popu-lation and a measure of the quality of institutions (Keefer and Knack 1995), onthe one hand, and the growth rate of the economically active population and ameasure of openness (Sachs and Warner 1995), on the other. Columns 3a and3b explore w hether any regional effect rem ains. There is no evidence sup por tingthe view that the policy environment influences the linkage between populationdynamics and economic performance. Further w ork w ill be required to exam inethe conditions that promote enjoyment of the demographic gift. See, for ex-ample, Higgins and W illiamson (1997) or Bloom, Canning, and Malaney (1998).There is some weak evidence that Asia grew faster than the otnitted region,Africa, even after controlling for all of these forces, but there is no strong evi-dence to suggest that Asia, after controlling for all of these forces, grew anyfaster than North America or Europe. (See Bloom and Sachs forthcoming for ananalysis of the economic performance of Africa that highlights the importanceof demographic and geographic factors.) There is also no evidence of a nonlin-ear relationship, ceteris paribu s, between initial income and income grow th.

We have established that g row th of the dependent popu lation slows economicgrowth. However, does a growing young, dependent population have the sameimpact as a growing elderly, dependent population? In table 6 we modify theestimation equation by inserting the growth rates of the population under 15and over 65in place of the grow th ra te of the po pula tion as a whole . The resultssharpen our understanding of how dependent populations contribute to the slow-down. Table 6 reports only the coefficients on the demographic variables. Thecoefficient on the population under the age of 15 is negative and significant inboth specifications: thus an increase of1 percentage point in grow th of the pop u-Table 6. Effects of Growth in the Economically Active Populationand the Dependent Population on Economic Growth, 1965-90Variable a bGrow th of economically active population, 196 5-90Growth rate of population under 15, 1965-90Growth rate of population over 64, 1965-90Adjusted R 1

Note: The dependent variable is the growth rate of realGDP per capita in 1965-90 in purchasingpower p arity term s. Estimates are from ord inary least squa res. Only the coefficients on the dem ographicvariables are reported in the table. The specification used in columns a and b also include the othervariables in table 2 in columns a and b, respectively. The sample size is 78 economies (see the app end ix).Standard errors are in parentheses.

0.82(0.21)- 0 . 7 1(0.16)0.11(0.10)0.78

0.81(0.18)- 0 . 3 7(0.16)0.08(0.08)0.86


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44 0 T HE W O R L D BA N K E CO N O M I C R EVIEW , V O L . 1 2 , N O . 3

lation under age 15 is associated with a decrease in growth of GDPper capita ofabout 0.4 percentage point (column b). In contrast, a small, statistically insig-nificant, but positive, coefficient emerges for the elderly pop ula tion. W e conjec-ture that because the elderly continue to make important economic contribu-tions by tending the young, by working p art-time, and pe rhaps by continuing tosave, they are a smaller net drag than are the very you ng, whose lab or participa-tion and savings rates are trivial in magnitude. Because the elderly are currentlya small minority of the total dependent population in Asia (11 percent in 1990),the relation ship between the de pende nt you ng and grow th in GDP per cap itadominates, accounting for the negative effect that the dependent population as awhole exerts on the growth rate ofGDP per capita.

Our findings regarding the economic impact of the demographic transitioncan be summarized as follows. Economic growth is less rapid when the growthrate of the working-age population falls short of that of the population as awhole (an event that characterized the first phase of East Asia's postwar demo-graphic transition prior to 1970). Economic growth is more rapid when thegrowth rate of the working-age population exceeds that of the population as awhole (an event that characterized the second phase of East Asia's postwar de-mo graphic transition after 1970 and overlapped w ith the economic miracle dur-ing the past qu arter century). And economic g rowth is somewha t less rapid whenthe growth rate of the working-age population once again falls short of that ofthe entire population (an aging phenomenonthe graying of East Asiathatwill dominate this subregion during the next quarter century).Our interpretations of the econometric results reported in this section are, ofcourse, limited by the validity of the underlying theoretical framework and cor-responding empirical specifications and by the quality of the data. Although theestimates are wholly consistent with the predictions that emerge from the theo-retical model, firmly establishing causality requires further empirical and theo-retical research. For example, it would be useful to conduct analyses that (a)incorporate indicators of the quality of data contained in the Penn World Tables,(b) exploit time-series variation in the da ta, and (c) explore the use of alternativeregressors and functional forms. Working directly with figures on growth inemployment in place of growth of the working-age population would also beuseful, although this would reduce the sample of countries considerably. Recentextensions of this analysis to the late nineteenth century by Williamson (forth-coming) show quite clearly that other episodes of dramatic growth have beensignificantly influenced by demographic transitional events, and they need moreattention too.

FV. EXPLAINING THE EAST ASIAN MIR AC LESo far, these results seem consistent with the stylized characterization in fig-

ure 6. But they concern only hypo thesis testing an d statistical significance. W ha t


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about economic significance? Can our improved understanding of populationdynamics explain a significant part of the East Asian miracle?Between 1965 and 1990, the working-age population in East Asia grew 2.39percent a year, dram atically faster th an the 1.58 p ercent rate for the entire pop u-lation and the 0.25 percent rate for the dependent population (table 7). Theworking-age population also grew faster than the entire population in SoutheastAsia, but the differences were almost half of those in East Asia, while in SouthAsia they were only a quarter.

These demographic differences explain at least some of the variation in eco-nomic grow th across the subregions of Asia between 1965 and 199 0. Com biningthe coefficients from the estimated growth equations in table 5 and the growthrates of the working-age and total population, table 7 indicates that populationdynamics can explain between 1.37 and 1.87 percentage points of growth in GDPper capita in East Asia or as much as one-third of the miracle (1.9 / 6.11 = 0.31).If, in stead, the m iracle is defined as the difference between c urren t gro wth ofGDPper capita (a transitional rate where population dynamics matter) and the esti-mated steady state of2percent (when po pulation is also in steady state and h as noimpact), then population dynamics can explain almost half of the miracle (1.9 /[6.11 - 2] = 0.46). In Southeast Asia, where the decline in fertility took place alittle later and the decline in infant m ortality was a little less dra m atic , po pulationdynam ics still accou nt for 0.9 to 1.8 p oints of economic grow th or , again, as mu chas half of its (less impressive) miracle (1 .8 /3 .8=0.47 ). In South Asia, the incipientdemographic transition accounts for only 0.4 to 1.3 percentage points of eco-nomic grow th, but still as much as three-quarters of a poo r grow th performance(1.3 / 1.7 = 0.76). The economies that benefited most from these demographicchanges were Hon g Kong (China), Malaysia, Republic of Korea, Singapore, Tai-wan (China), and Thailand , all of which are old or new fast-growing tigers. Thebiggest demographic contribution seems to have been in Singapore, at 1.9 to 2.3percentage points, but Th ailand is close behind, at 1.5 to 2.3 percentage p oints. Itis no coincidence that these tigers attracted m ost of Krugm an's attention when heasserted that the East Asian miracle was driven mainly by high rates of capitalaccumulation and labor force growth (Krugman 1994).3

Co m pared with the rest of the wo rld, East Asia was the largest beneficiary ofthe population dynamics associated with demographic change. Europe receivedonly a small post-baby boom boost of 0.33 to 0.52 percentage points. EvenSouth Am erica's dem ographic im pact, 0.74 to 1.54 percentage points, was smallerthan East Asia's, although the demo graphic contribu tion was almost identical to3. Krugman relied on the findings of Young (1994a, 1994b) and Kim and Lau (1994). In a recentstudy, however, Hsieh (1998) uses a price-based approach to calculate total factor productivity growth

(TFPC)and gets much higher estimates, especially for Singapore, than those resulting from the conventional,quantity-based appro aches. He attribute s the differences between prim al (quantity-based) and du al(price-based) estimates of TFP to errors in national accounts data on quantities of output and capital.Hsieh argues that factor price data are more reliable, because they can be observed in a marketplace.


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t

Table 7. Contribution of Demog raphic C hange to Past Econom ic Groivth, by Region, 1965-90

RegionAsiaEast AsiaSoutheast AsiaSouth AsiaAfricaEuropeSouth AmericaNorth AmericaOceania

Averagegrowth rateof realG DPper capita3.336.113.801.710.972.830.851.611.97

Averagegrowthrate ofpopulation2.321.582.362.272.640.532.061.721.57

Averagegrowth rate ofeconomicallyactive population2.762.392.902.512.620.732.502.131.89

Averagegrowth rateof dependentpopulation1.560.251.661.952.920.151.711.111.00

la1.041.711.250.660.140.431.030.940.74

Estimated contributionlb1.641.871.811.341.100.521.541.341.14

2a0.861.601.070.48-0.070.390.870.810.62

2b0.731.370.910.41-0.060.330.740.690.53

Note: The averages in the first four columns are unweighted country averages. The estimated contribution is created by multiplying the coefficients on thegrowth rate of economically active population and the population growth rate (table 5) by the regional averages and adding the two for each of the reportedspecifications.Source:A uthors' calculations.


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that of Asia as a whole. Furthermore, these figures for late twentieth centuryEast Asia are far bigger than for nineteenth century E urope and the New W orld(Williamson forthcoming).The future will look quite different. Table 8 offers a forecast based on thecoefficients of the estimated growth model and the United Nations (1991) de-mog raphic projections up to the year 20 25 . In East Asia, the growth inGDPpercapita attributable to demographic influences is projected to be negative be-tween 1990 and 2025, declining from a positive gain of 1.37 to 1.87 percentagepoints between 1965 and 1990 to a lossof 0.14 to 0.44 percentage point up to2025 .This projected slowing of econom ic gro wth of 1.5 to 2.3 percentage poin tsis caused solely by demographic forces. The demographically induced loss ingrowth is projected to be even larger in some parts of East Asia. If nothinghappens to offset them, demographic events will induce a decline of 2.0 to 2.4percentage points in the grow th ofGDPper capita in Hon g Ko ng, a decline of 2.5to 3.0 percentage points in Singapore, a decline of 1.9 to 2.2 percentage pointsin Korea, and a decline of 0.9 to 1.1 percentage points in Japan. In contrast,South Asia will potentially enjoy a gain of 0.77 to 1.38 percentage points in thegrow th rate as it leaves the early bu rde n stage of the dem ographic transitionand enters the gift stage, with the largest po tential gains being for Pakistanand Bangladesh. Southeast Asia should register a slightly smaller demographicgift of 0.62 to 1.10 percentage points, with considerable variance across coun-tries. The biggest potential gainer is projected to be the Philippines, and thebiggest potential losers are projected to be Malaysia and Thailand.

While demographic divergence contributed to Asian economic divergenceduring the past quarter century, with South Asia falling behind East Asia, thedemo graphic indicators most imp ortan t to economic performance w ill convergeacross Asia from now t o 20 25 . If our hypoth eses survive further sc rutiny, dem o-graphic convergence should con tribute to econom ic convergence during the next30 years in the region. The East Asian connection between dem ographic transi-tion and economic miracle is now being replayed in South Asia and even moreso in Southeast Asia. Although demographic divergence contributed to economicdivergence in Asia over the past three to four decades, demo graph ic con vergencewill contribute to economic convergence over the next three to four decades.Figure 7 offers a stylized chara cterizatio n of those events.

V. POSSIBLE CHA NN ELS OF IMPACTMacro evidence supports the hypothesis that demographic events matter inexplaining the East Asian economic miracle. Theory seems to explain the corre-lation, but the hypothesis will be strengthened further if we can show evidencethat the channels of impact have been working the way theory predicts. What

follows suggests that demographic factors were driving not only the labor forcebut also a good portion of the high and rising savings and investment rates.


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Table 8 Contribution of Demographic Change to Future Economic Growth by Region 1990-2025Projected

growth rateofRegion population

Projected growthrateofeconomically

active populationProjected growth

rate ofdependent population

Estimated contributionla0.61

-0.400.831 020.98

-0.320.820.21

-0.22

lb0.99

-0.141.101 381 63

-0.161 150.6450.24

2a0.50

-0.440.730.900.73

-0.340.710.11

-0.31

2b0.43

-0.380.620.770.68

-0.290.600.10

-0.26

A s i aEast A siaSoutheast AsiaSouth AsiaAfricaEuropeSouth AmericaNorth AmericaOceania

1 360.431 291 652.400.171 501 281 08

1 610.201 662.112.78

-0.0041 871 330.93

0.990.870.630.901 880.480.941 211 37

Note: The averagesin the first three columnsareunweighted country averages.The estimated contribution iscreated by multiplying thecoefficients on thegrowth rateof econ omical ly active p op ulation and thepopulatio n grow th rate (table5)by the regional averages andaddin g the two foreachofthe rep on edspecifications.Source: A uthors' calculation s.


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Bloom and Williamson 445Figure 7. Stylized Model of Economic Growth and the Demographic Transitionin AsiaGrowth in GDPper capita

East Asia /Southe ast Asia /

Demographic divergence^ ^ econom ic divergence? Demographic convergence ^ ecopomic convergence?c. 1950 c. 1995 Future

Time

The Impact of Demography on Labor Force GrowthHow much of the fast-growth transition in Asia can be explained by the im-pact of demography on labor inputs? Elsewhere we offer some answers that areonly summarized here (Bloom and Williamson 1997: table 6). Our interest, ofcours e, is in labor inputs per person. Gro wth in labor input per person (workinghours per capita, or H I P) can be separated into three parts: changing hoursworked per worker (HIL), changing labor participation rates amo ng persons ofwork ing age (L /EAP), and changing shares of the population of working age(EAP I P), the pure demographic effect. Thus per capita hours worked can bedecomposed into HIP (HIL) (L I EAP) (EAP IP).How much of Asia's economic growth can be explained by a rise in laborinput per capita brought about by purely demographic forces? The answer forthe period between 196 5 and 1975 is very little, but for the period betw een 197 5and 199 0, quite a lot. The rising working-age share served to augm ent the gro wthof labor input per capita by about 0.75 percentage point a year between 1975and 1990. This implies that about 0.4 percentage point of Asia's transitionalgrowth since 1975 (or about a tenth of growth in GDP per capita) can be ex-plained by pure demographics.4 The results are more striking for East Asia.

4. Calculated by multiplying the growth of labor input per capita by the output elasticity of labor.The outpu t elasticity is taken to be 0.56, the average for the 1960s and 1970s of Japan, Hong K ong,


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44 6 THE W O R L D BA N K ECO N O M IC R EVIEW , V O L.12, NO. 3

Growth inlabor inputpercapita brought aboutbypure demographywasmorethan 1.1 percentage points a year, equivalent to 0.6 percentage pointof eco-nomic growth. The previous section estimated that demographic forces couldaccountfor 1.37 to 1.87percentage po intsofthe East Asian miracle.Thedemo-graphic impacton labor inputpercapita a ppearstoaccountforabout30 to 40percentof thetotal d emo graph ic effect.Theresultsfor Southeast Asiaaremoremodesta little more than 0.6percentage pointayearandthusalittle less than0.4 percentage point of economic growth isexplained by pure demographics.Th e resultsareless strikin gforSouth Asia. Byitself, thepure d emo graphic effectimplies areductionof 0.5percentage pointingrowthofGDPpercapita inSouthAsia compared with East Asia, thus contributing to economic divergence be-tween the tworegions sincetheearly 197 0s.Howmuchoffaster g row thinEastAsia compared with theindustrial coun tries wasduesimplytothese demog raphicforces oflabor inpu tpercapita?Theanswer isalmost0.5percentage po int,orabout four-tenths of the gapbetweenthe two.

These demographic forcesoflabor inputpercapitado not, ofcourse, exhaustall influenceson labor supply.Nor dothey ex haustalldemog raphic transitionalinfluences on the growth rate .But are they likely to persist in the future? Itdepends onwhere inAsiawelook.Thefallin the pure demographic effect willbeahuge1.13 percentage pointsayearinEast Asia, causing g row thtoslowbyabout 0.6 percentage point. In sharp contrast, the fall will raise South Asia'sgrowth rate ofGDPper capita, although not bymuch.The demographic influ-ence on labor inputs will,by itself, foster aconvergence ofGDPpercapitabe-tween the poor South and the rich East, favoring growth in theSouth by 0.7percentage point. Whether South Asia will actually realize this potential is, ofcourse,adifferent m atte r.

Willthedemographic factors that areslowing economic grow th beoffset byAsians working harderand byparticipating m ore activelyin thelabor force?Amore likely outcome isthat Asians will work less hardastheir incomes rise, justas workers before them have done in the more industrially mature countries.And fewer prime-age Asians will work, because they will beabletoafford ear-lier retirement and will invest more in schooling. In any case, even if Asianswork justashard in the future, this will contribute nothing togrowth of laborinput per capita; Asians would have to work harder and harder to maintainratesof labor inputpercapitagrowth (asopposed tolevels)in the future.

The Impact ofDemography on SavingsAlmost40yearsagoCoaleandHo over (1958) proposed their famous depen-dency hy pothesis.Itwas basedon asimple,butpowerful, intuition: rapid po pu-lation growth from falling infant andchild mortality andhighor rising fertilityswell the ranks of the dependent young, thereby increasing consumption re-quirements at theexpenseofsavings. Eventually,theyouth dependency burden

evolves into ayoung adult glut,and theresulting savings boom contrib utesto aneconomic miracle. Finally, thedemographic transition isman ifested by a large


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elderly burden, low savings, and a deflation of the miracle. The Coale-Hooverhypothesis suggests tha t som e of the impressive rise in Asian savings rates can beexplained by the equally impressive decline in dependency bur den s, that som e ofthe difference in savings rates between sluggish South Asia and booming EastAsia can be explained by differences in their dependency bu rde ns, and th at someof the savings rate gaps between the two regions should diminish as the youthdependency rate falls in South Asia and the elderly dependency rate rises in EastAsia over the next three decades.

Empirical tests of the Coale and Ho over (1958) hypothesis have yielded m ixedresults. LefPs (1969) study appeared to place the youth dependency hypothesison a solid empirical footing. But later research by Goldberger (197 3), Ra m (198 2),and others failed to confirm the dependency hypothesis and cast doubt on thevalidity of the empirical methods employed in the earlier studies. Theoreticaldevelopments also seemed to undermine the foundations of the dependency hy-pothe sis. To bin 's (1967) life-cycle model held tha t the nationa l savings rate shouldincrease with faster population growth. The reason is simple, at least in thatmodel: faster population growth tilts the age distribution toward young, savinghouseholds a nd aw ay from older, dissaving ones. The representative-agent elabo -ration of Robert Solow's neoclassical growth model pointed in the same direc-tion as Tobin's, with faster population growth resulting in higher savings ratesin response to heightened investment demand (Cass 1965, Phelps 1968, andSolow 1956). However, the models just described failed to deal adequately withthe dynamics implied by the demo graphic transition. The age tilt in Tob in'ssteady-state model occurs because the model describes a world restricted to ac-tive adults and retired dependents; it would imply a very different tilt if it alsoacknowledged youth dependency. Similarly, the neoclassical growth models as-sume fixed labor participation rates and by implication assume no change in thedependency rate, which is exactly what one would assume in a model of steady-state behavior but is inconsistent with the facts of demographic change. In ef-fect, both models sacrifice the rich population dynamics implicit in Coale andHoover's (1958) predictions about the Asian demographic transition.

In the 1980s Fry and Mason (1982) and Mason (1988) addressed the tensionbetween the dependency rate and life-cycle models. These authors developedw hat they called a variable rate-of-grow th effect mo del to link you th depen-dency and na tiona l savings rates. Their mod el rests on the premise th at a declinein the youth dependency rate may induce changes in the timing of life-cycleconsumption. If consumption is shifted from child-rearing to later, nonchild-rearing stages of the life cycle, aggregate savings rise with a strength that de-pends directly on the growth rate of national income. As a result, the modelsuggests that the savings rate depends on the product of the youth-dependencyratio and the grow th rate of natio nal income (the grow th-tilt effect ), as wellas on the depen dency ra tio itself (the level effect ).

Under the aegis of this new model, the dependency hypothesis has enjoyedsomething of a renaissance. The Coale-Hoover theory has evolved into explicit


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44 8 THE W O R LD BA N K ECO N O M IC R EVIEW , V O L. 1 2 , N O . 3

economic models that, now revised, account very well for cross-country savingsvariations in macro time series. Almost all recent analyses of macro data con-firm the Coale-H oover effects (Collins 1 99 1; H arriga n 199 6; Higgins 19 94,1998a; Kang 1994; Kelley and Schmidt 1995, 1996; Lee, Mason, and Miller1997;Masson 199 0; Taylor 1995; Taylor and Williamson 1994 ; W ebb and Zia19 90 ; and Williamson 19 93), even if they receive weak sup po rt at best in house-hold cross-sections (Deaton and Paxson 1997), a difference that future researchneeds to reconcile.5

Higgins and Williamson (1996, 1997) have estimated the largest macro im-pacts , and what follows uses their results. They estimate the effect of changes inpopulation age distribution on changes in, not levels of, the savings rate as itdeviated around the 1950-92 mean. Thus East Asia's savings rate in 1990-92was 8.4 percentage points above its 1950-92 average because of its transition toa m uch lighter dependency bu rden. Similarly, East Asia's savings rate in 1 9 7 0 -74 was 5.2 percentage points below its 1950-92 average because of its heavydependency b urden at that time. The total demog raphic swing was an enorm ous13.6 percentage points, which would ap pear to acco unt for theentirerise in thesavings rate in East Asia during these 20 years. The figures for Southeast Asiaare similar, but not quite so dramatic. Southeast Asia's savings rate was 7.9percentage points higher in 1990-92 than the average in 1950-92 because itsdependency burden was lighter and was 3.6 percentage points lower in 1970-74, when its burden was heavier. The total demographic swing was 11.5 per-centage points, a smaller figure than for East Asia, but still apparently account-ing for the entire rise in the savings rate in South east Asia after 19 70 . The regionwith the slowest demographic transition has been South Asia, so its far moremodest changes in the savings rate are predictable.

To the extent that domestic saving constrains accumulation, falling depen-dency rates have played an important role in East Asia's economic miracle since1970. Indeed, assuming the increase in investment to have been equal to theincrease in savings, and assuming a capital-output ratio of 4, it follows thatdemographic changes raised accumulation rates in East Asia by 3.4 (13.6 / 4)percen tage p oin ts, thus aug men ting the gr ow th in GDP per capita by an esti-mated 1.5 percentage points. Given that demographic forces raised East Asiangrowth rates by as much as 1.87 percentage points, about three-quarters of thisgrowth seems to have been due to capital accumulation responses. The figure is

5. Higgins (1998b) also points out that the results from analysis of the micro data and the macrodata might not ag ree, because the data are not con sistent. Specifically, househo ld survey data typicallydo not correspond t o the app ropriate concept of personal saving as measured by the national incomeaccounts. He no tes, as well, that data on the components of national savings (personal, corporate, andgovernment) are difficult to find.Lee, Mason, and Miller (forthcoming) point out th at D eaton and Paxson's (1997) analysisisessentiallya comparative steady-state analysis rather than a dynamic analysis, because they assume that the ageprofiles of saving and income are invariant to changes in the rate of population gro wt h. Because theeffects of the demographic transition depend crucially on dynamic changes, Lee, Mason, and Millerargue that the Deaton and Paxson analysis misses such effects.


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too high, of course, because of the unsupported assumption that domestic sav-ings fully constrained investment.The Impact of Demography on Investment

To the extent that East Asia was able to exploit global capital markets duringthe past quarter century, the supply of domestic savings is far less relevant thanthe demand for investment in determining accumulation performance. As thechildren of the baby boom became young adults, did the increase in new work-ers imply the need for investm ent in infrastructure to get them t o w ork , to equipthem while at work, and to house them as they moved away from their parents?W hen Higgins and Williamson (1 996 ,199 7) test this augmented Coale-Hooverhypothesis on Asia's past, changing age distributions seem to have had the pre-dicted impac t. For East Asia, demo graphic effects have raised investment sharesby 8.8 percentage points since the late 1960s. Using the same assumptions madein the previous section on savings, this implies a rise of 1percentage poin t in thegrowth rate ofGDP per capita. In sum, demographic forces appear to have con-tributed 0.6 percentage point to the East Asian miracle via labor inputs percapita and 1 percentage point via capital accumulation per capitaquite consis-tent with the total demographic impact estimated using macro growth equa-tions: 1.37 to 1.87 percentage points. Thus labor force growth responses mightaccount for about one-third of the positive demographic contribution to themiracle (0.6 / 1.9), capital accumulation responses for about one-half (1 / 1.9),and other forces for the small remainder.

VI. DIRECTIONS FOR FUTURE RESEARCH AND CONC LUSIONThe findings presented herein are revisionist, and thus the methods and dataused are likely to com e und er close scrutiny. Future studies will no do ub t refineand revise our a rgum ents. Already w e can suggest five ways to further this lineof research. First, other theoretical approaches might be explored. The standardSolow-Swan model has, after all, been criticized. New ways of thinking aboutgrowth could provide other models in which demographic dynamics and eco-

nom ic growth co uld be assessed jointly. Second, as further advan ces in the gro wthliterature define the steady state more effectively, the robustness of our resultscan be tested and the analysis extended. Third, far more work needs to be doneto establish the sources of the demographic transition in Asia after World WarII: how much of the transition was due to exogenous factors and how much toendogenous? Fourth, economists and demographers may search for other dra-matic episodes of growth or decline, such as the age of mass migration (Taylorand Williamson 1994 and Williamson forthcoming), the AIDS epidemic (Bloomand Mahal 1997), or the Russian mortality crisis of the early 1990s (Bloom,Canning, and Malaney forthcoming) to see if this model proves equally appli-cable. Fifth, oth er app roach es to u nders tandin g simu ltaneity in the effect of eco-nomic growth on population need to be developed, perhaps by analyzing the


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45 0 THE W O R LD BA N K EC O N O M IC R EVIEW , V O L 1 2 , N O . 3

effects on demographic variables of large and unanticipated variations in in-com e per capita such as those caused by oil price shocks in the 1970 s and 19 80s .With those caveats, our first major finding is that population dynamics mat-ter in the determ ination of economic grow th. But the overall popu lation grow th

rate is not the mechanism driving economic perform ance. R ather, age distribu-tion is the mechanism by which demographic variables affect economic growth.These age distribution effects seem to be purely transitionalalthough a fulltransition can take more than 50 yearsand operate only when the growthrates of the working-age and dependent populations differ. The demographictransition is induced by an initial decline in infant and child mortality, whichswells the youth dependency cohort until fertility rates begin to fall. It therebyhelps to trigger an economic transition in which growth performance passesthro ug h three p hases: initially it is impeded w hen the youth dependency coho rtswells; it is abetted in the next phase about two decades later when the swollencohort reaches working age; and it is modestly impeded again some decadeslater when this swollen cohort becomes elderly.The second major finding is that population dynamics account for a substan-tial share of East Asia's economic miracle. Population dynamics account forsomewhere between 1.4 and 1.9 percentage points of East Asia's annual growthin GDP per capita from 1965 to 1990, or as much as one-third of observed eco-nomic growth during the period. The economic miracle can, of course, be de-fined differently. Assume tha t the steady-state g row th ra te in East Asia is abo ut2 percent a year, in wh ich case the m iracle is everything in excess of th at, or

ab ou t 4.1 percent (6.1 percent - 2 percent = 4.1 percen t). Under this definition,population dynamics could account for almost half of the miracle. One-third orone-half is certainly not everything, but it suggests that population dynamicsmay have been the single most important determinant of growth. Within Asia,the evidence also suggests that demographic divergence contributed to economicdivergence during the same period. If Southeast and South Asia can use theirmid phase demo grap hic gift in the same way th at East Asia did earlier, dem o-graph ic convergence within Asia may contribute to economic convergence in thecoming decades.In any case, although the results presented here certainly do not prove tha tpopulation dynamics affect economic growth during transitions, they are suffi-ciently robust to justify additional research on the economic-demographic con-nection. That research, we suggest, should focus not just on aggregate popula-tion gro wth bu t also on po pulation dynam ics as they affect the age distribution.


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A P P E N D I X . L I S T O F E C O N O M I E S I N C L U D E D I N T H E D A T A S E T1. Botswana2. Cameroon3. The Gambia4. Ghana5. Guinea-Bissau6. Kenya7. Malawi8. Mali9. Niger10.Senegal11. Sierra Leone12. South Africa13. Tanzania14 . Tunisia15 .Uganda16 . Zaire17. Zambia18. Zimbabwe19. Canada20. Costa Rica2 1 . Dominican Republic22.El Salvador2 3. Guatemala24. Haiti25 . Honduras26.Jamaica

27. Mexico28. Nicaragua29. Trinidad and Tobago30. United States31 . Argentina32. Bolivia33. Brazil34. Chile35. Colombia36. Ecuador37. Guyana38.Paraguay39. Peru40. Uruguay4 1 . Venezuela42. Bangladesh4 3 . China44 . Hong Kong (China)45 . India46. Indonesia47 . Israel48 .Japan49. Jordan50.Korea, Fed. Rep. of51 . Malaysia52. Pakistan

5 3 . Philippines54. Singapore55. Sri Lanka56.Syria57. Taiwan (China)58 . Thailand59. Austria60. Belgium61 . Denmark62. Finland63. France64.G ermany, Rep. of65. Greece66. Ireland67. Italy68 . Netherlands69. Norway70. Portugal71. Spain72. Sweden7 3. Switzerland74. Turkey75. United Kingdom76. Australia77. New Zealand78. Papua New Guinea

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Journal of Economics 106 (2, May):40743.Barro, Robert J . , and J. W . Lee. 1994. Sources of Economic Gro w th. Carnegie-

Rochester Conference Series on Public Policy40(June) : l -46 .Barro, Robert J . , and Xavier Sala-i-Martin. 1995. Economic Growth. New York :

McGraw-Hil l .Baum ol, William J. 1986 . Productivity Gr ow th, Convergence, and Welfare: W hat theLong-Run Data Show. American Economic Review 76(December):1072-85.Bloom, David E., David Canning , and Pia N . Ma laney. 1998 . Pop ulation D ynamicsand Economic Gro w th. Paper presented at the conference on economic aspects of


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demographic transition: the experience of Asian-Pacific countries, Taiwan (China),19- 20 June. Processed.-. Forthcom ing. Ma croecon omic Consequences of the Russian Mo rtality Cri-sis. World Development.

Bloom , David E., and Rich ard B. Freeman. 19 86 . Th e Effects of Rapid Pop ulationGrowth on Labor Supply and Employment in Developing Countries. Populationand Development Review 12(3, September):381-14.. 1988. Econo mic Development and the Timing and Comp onents of PopulationGrowth . Journal of Policy Modeling 10(1, April):57-82.

Bloom, David E., and Ajay S. Ma hal. 1997 . Does the AIDS Epidemic Threaten Eco-nomic Growth? journal of Econometrics 77(1 , March) :105-24 .Bloom, David E., and Waseem Noor. 199 7. Is an Integrated Regional Labour M arke tEmerging in East and Southeast Asia? In Du ncan C ampb ell, Aurelio Parisotto, AnilVerma, and Asma Lateef,eds.,Regionalization and Labour M arket Interdependencein East and Southeast Asia,p p. 15 -39. New York: St. Martin 's Press.Bloom, David E., and Jeffrey D. Sachs. Forthcom ing. Ge ograp hy, Demo graphy, andEconomic Growth in Africa. Brookings Papers on Econom ic Activity.Bloom, David E., and Jeffrey G. Williamson. 1997 . Dem ograph ic Change and Hum anResource Dev elopm ent. In Asian Development Bank, Emerging Asia. Manila .Boserup, Ester. 1981.Population a nd Technological Change: A Study of Long-TermTrends. Chicago: University of Chicago Press.Boulier, Bryan. 1986 . Family Planning Programs and C ontraceptive Availability: TheirEffects on Con trace ptive Use and Fer tility. In Na ncy Birdsall and othe rs, eds., TheEffects of Family Planning Programs on Fertility in the Developing World WorldBank Staff Working Paper 677. Washington, D.C.: World Bank.Bra nder , J. A., and Steve Do wr ick. 199 4. Th e Role of Fertility and Popula tion in Eco-nomic Growth: Empirical Results from Aggregate Cross-National Data. Journal ofPopulation Economics 7(l) : l-25.Caldwell, Joh n C , and Bruce K. Caldwell. 1996 . Asia's Dem ographic Tra nsition .Background paper prepared for the Asian Development Bank, Manila. Processed.Cass,David. 1965 . Op tim um Grow th in an Aggregative Mo del of Capital Accumula-tion. Review of Economic Studies32 (3 , July):23340.Chenery, Hollis B., Sherman Robinson, and Moshe Syrquin. 1986. Industrializationand Growth: A Comparative Study. New York: Oxford University Press.Co ale, Ansley J. 198 6. Population Trends and Economic Developm ent. In Jane A.Menken, ed. , World Population and U. S. Policy: The Choices Ahead New York:Nor ton .Coa le, Ansley J., and Edgar H oover. 1 958 .Population G rowth and Econom ic Develop-ment in Low-Incom e Countries. Princeton, N.J.: Princeton University Press.Coale, Ansley J., and Susan C. Watkins. 1986. The Decline of Fertility in Europe.Princeton, N.J.: Princeton University Press.Collins, Susan. 199 1. Saving Behavior in Ten Developing Coun tries. In B. DouglasBernheim and John B. Shoven, eds., National S aving and Economic Performance.Chicago: University of Chicago Press.D ea ton , Ang us, and Christina Paxson . 199 7. Th e Effects of Econom ic and Popula-tion Grow th on N ational Saving and Ineq uality. Demography 34(1 , February):97-


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Bloom and Williamson 453Ehrlich, Paul R. 1968. The Population Bomb. New York: Ballantine.Ehrlich, Isaac, and Francis T. Lui. 19 91 . Intergene rational Tra de, Longevity, and Eco-nomic G rowth. Journal of Political Economy 99(October):1029-59.Feeney, Griffith, and And rew M ason . 1997 . Pop ulation in East Asia. Paper presentedat the conference on population and the Asian economic miracle, East-West Center,Honolulu, Hawaii, 7-10 January. Processed.Fogel, Robe rt W . 1994 . Econom ic Gr ow th, Population Theo ry, and Physiology: TheBearing of Long-Term Processes on the Ma king of Economic Policy. American Eco-nomic Review 84(3 , June):369 -95.Fry, M axw ell, and Andrew Mas on. 1982 . The Variable Rate-of-G rowth Effect in theLife-Cycle Saving Model: Children, Capital Inflows, Interest, and Growth in a NewSpecification of the Life-Cycle Model Applied to Seven Asian Developing Countries.Economic Inquiry 20(3, July):42642

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