Business-Economic Perspective on Popdev - Dr. Ernesto Pernia

8/8/2019 Business-Economic Perspective on Popdev - Dr. Ernesto Pernia

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Population and Development

Economic Perspective

Ernesto M. PerniaUP School of Economics

Mulat Pinoy

28 August 2010


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Outline

Introduction Negative externalities of rapidpopulation growth

Macro perspective Micro perspective

Food & fuel shortages

Tale of diverging twins Conclusion: Daunting challenges for P-

Noy

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Population issue remainscontentious

Majority of Filipinos regard rapid populationgrowth as hindrance to development,requiring policy intervention.

But government appears immobilized owingto opposition from Catholic Church hierarchyand other conservative groups.

Yet the influence of the Church on fate ofpolitical leaders seems overrated.

Hard Churchand soft Stateat the root of RPsinability to achieve demographic transitioncumeconomic development.


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Population issue remains

Reality is that a well-organized, single-

issue vocal opposition is tamping thesilent majority.

Filipinos typically dont want to talk

openly about sex which intimatelyrelates to the population issue.

Thus, parents try to maintain reticent

dignityvis-a-vis their kids sexualityeven if they dont want them involvedin pre-marital pregnancy, so they can

finish their education!


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Population issue remains

The squeaky wheel phenomenon.

Isnt the State to blame, even more sothan the Church, for not addressing thepopulation issue?

In other Catholic countries, the Statehas not allowed itself to be kepthostage by the Church.

Little wonder, RP has a hardpopulationand a softeconomy!


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Negative externalities of rapidpopulation growth (RPG)

Economic growth: RPG constrainsinvestments in physical and human capital

low productivity, hence, social cost of sloweconomic growth & poverty reduction.

Environment: RPG strains the environment,incl. sources (forests, water) and sinks (air

thats polluted) climate change, thoughdeveloped countries contribute much more toglobal climate change.


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Negative externalities (contd)

Poverty and inequality: RPG raises supply

of labor relative to land and physical capital lower wages (esp. for less skilled), hence,greater inequality and poverty.

In RP, poorest quintile increases close todouble the overall average growth rate.

Inequality adversely affects economic growthdirectly.


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Macro perspective: population,economic growth, and poverty

In 1970s-80s, population growth of 2%+ in poorcountries was already considered high & hindrance toeconomic growth via low human capital investment,

unfavorable saving and capital-shallowing effects, etc. Echoed by a recent studies (e.g., Mapa 2006) that

highlights the demographic dividend fromdemographic transition, with work force rising fasterthan dependents.

Demographic transition must be early and quick toresult in significant dividends (higher saving rate, HRD,productivity, etc.) an opportunity RP has sadlymissed.


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Population Poverty

Annualgrowth

rate (%)

2005-2007

Totalfertility

rate

2006

% below poverty line

ca. 2004% share of

the poorest

quintile in

national

income or

consumption

2004

National

2004

PPP

$/day

2004

Bangladesh 1.3 2.9 40.0 536.3 5

8.6 5

Indonesia 1.1 2.2 16.6 7 7.7 2 8.4 2

Malaysia 2.0 2.7 5.1 2 0.0 6.1

Nepal 2.2 3.4 30.9 24.7 3 6.0

Pakistan 2.0 3.6 23.9 9.8 9.2

Philippines 2.1 1 3.3 33.0 6 13.2 3 5.5 3

Thailand 0.7 1.8 9.8 2 0.0 2 6.4 2

Vietnam 2.0 2.2 19.5 8.4 7.2

Table B: Population and Poverty StatisticsSelected Asian Countries


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Micro PerspectiveFertility and poverty

Consistent and tight link between fertility andpoverty.

Family size also directly related to likelihoodof falling into poverty owing to exogenous

shocks (e.g., typhoons, droughts, inflation). Mean per capita income, expenditure and

savings fall monotonically as family size rises.

Likewise, mean education spending perstudent and mean health spending per capita.


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Family Size and Poverty

Large family sizeclosely associated

with higherpoverty; be itincidence, gap orseverity.

This has notchanged in the last21 years; if at allincidence amongthose with smaller

family size hasgone down whilefor those withlarge family sizehas gone up.


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Family size and provisions for current andfuture needs

As family size rises, families

are not able to maintainper capita income, percapita expenditure, percapita savings, per capitahealth expenditure, and perstudent education

expenditure.

Less able to provide forcurrent needs

Less able to protect

against income shocksLess able to invest inhuman capital or poorerincome prospects for theirchildren.


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Family size and hunger

Strong association between family size(FS) and poverty further substantiatedby link beween FS and hunger (Mangahas

2009). Hunger rates tend to rise monotonically

with number of family members,especially for severe hunger.

Average hunger incidence for RP

is about the rate for families of 5-6

members.


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Table E. Hunger Incidence by Number of Family Members

Family members Total hungry Moderately hungry Severely hungry

(number) (%) (%) (%)

Philippines 18.4 15.2 3.2

1-2 10.0 8.0 2.0

3-4 17.6 15.5 2.1

5-6 18.5 15.4 3.1

7-8 23.9 18.5 5.4

9+ 25.2 17.9 7.3

Source: Mangahas (2009) based on SWS September 2008 Survey.


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Food-fuel shortages

Both a supply-side and a demand-side problem.

Agricultural production neglected foryears (irrigation, farm-to-market roads,technology, post-harvest facilities, etc.).

Slow moves in oil & gas exploration(e.g., Malampaya & Galoc) & alternativefuels (consider Brazils foresight!)

No demand-side management(population policy and FP programs).

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Bigger bang per buck

In 60s & 70s, studies showing thatinvestment in FP to avert (unwanted)pregnancies gives higher return

higher income per capita vis--visinvestment in physical infrastructure.

Many LDCs, including RP, took the

message to heart. RP among the first to initiate population

policy and FP in 1969.


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RPs policy failure

Unfortunately, RP failed to sustain whatit started.

By contrast, Thailand followed RPs leadlater in the 70s and sustained the effortwith vigor.


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A tale of diverging twins

In 1970, RPs population was 36.7mand Thailands about the same.

Population growth rate also about 3%

per annum for both twins. By 2008, RPs growth rate reported as

2.04%, while Thailands at 0.7%.

In 2010, Filipinos number 94m, whileThais about 67m the difference aboutMalaysias population!


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RPs rice shortage

If RP had sustained its population policy

and FP programs as did Thailand,annual rice consumption only about13m metric tons instead of 18m m.t.

At 16m m.t. domestic production, RP anet exporter of 3m m.t.

A conservative estimate because

savings from lower spending on publicservices could have been used to boostproductivity.


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Income and poverty

Moreover, at Thailands populationgrowth trajectory, RPs income p.c.would have been markedly higher,

poverty & unemployment rates lower.Again, pure demographic effects.

Does not allow for favorable feedback

effects in terms of higher saving,investment and productivity.


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Daunting challenges for P-Noy

Sustained political stability Improved governance curb corruption

Fiscal responsibility Better investment climate infrastructure

and regulatory system Higher investments in human capital

(education, health & nutrition) Raise investment in S&T (from 0.15% to1.0% of GDP)


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RPs daunting challenges

Review labor export policy seriouspolicy reforms to strengthen economy

Food security

Energy sufficiency Eco-tourism (open skies policy) Reduce population growth rate

demand management unambiguouspopulation policy

Poverty reduction quality of life

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Thank you!

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Business-Economic Perspective on Popdev - Dr. Ernesto Pernia