Population Growth and Economic Development

November 21, 2011Kyoto University

Junichi Mori

1

“Population Growth is still an issue.”

2

UNPF, Sate of World Population 2004, P8http://www.unfpa.org/upload/lib_pub_file/327_filename_en_swp04.pdf

Population explosion ( 人口爆発） concentrates on poor regions

3

http://www.worldbank.org/depweb/english/modules/social/pgr/map1a.html

Developed countries Developing countries

Average 1%

About 2.5%

Endogenous phenomenon by economic growth

Exogenous phenomenon by importation of health &

medical technologies

4

The Characteristics of Population Growth

KUINEP

In an economic model, an endogenous change is one that comes from inside the model and is explained by the model itself. An exogenous change is one that comes from outside the model and is unexplained by the model.日本語：　 endogenous ( 内生的）　 exogenous ( 外生的）

Population growth and economic development

5

Exogenous ( 外生的）

Endogenous 　（内生的）

Exogenous population explosion is not paralleled by increase in employment and income.

Developing economics face with the serious problem of resource exhaustion, economic degradation, and destitution.

KUINEP

Correlation between population growth and economic growth 人口と経済成長の相関関係

6

• Optimum population growth acceleration of economic growth 　経済成長の加速

• Over and under population growth constraint on economic growth 　経済成長の制約

• Population growth, which occurs in parallel with GNP growth would result in:

- further acceleration of economic growth

- enlargement of markets including products market and labor market

- induction into specialization

KUINEP

Negative Influence of population growth on economy 　人口成長が与える負の影響

7

If the population growth of a country is faster than the growth rate of GNP, then it has negative impact on the economy.

population growth GNP per capita decreases

purchasing power decreases substantially

shrinkage of various markets including products and labor market

vicious circle (shown as in Malthus model)

KUINEP

Population Growth

8

1. Natural increase 　（自然的増加）- The natural rate of Population growth (NR)

- = the birth- rate (BR) - the death-rate (DR)

2. Social increase 　（社会的増加）

- Migration

KUINEP

9

1 2 3

BR

DR

The Theory of Demographic Transition

Three phases of population growthChange in the birth- and death rates in the UK

10

KUINEP

Hayami (2005)

Why is the theory of demographic transition important?

To look for patterns which help explain changes in population growth rate

To help predict changes in population growth rate and effective ways of controlling it

11

The population of Japan since the Jomon era

12Source: 平成 16 年　少子化白書、 http://www8.cao.go.jp/shoushi/whitepaper/w-2004/html-h/index.html

Japan’s demographic transition

13

KUINEP

JICA (2003)

Phases of Japan’s demographic 　　　　　　　　　　　　　 transition

A period of high fertility rate and high mortality rate until 1870

A period of high fertility rate and low mortality rate between 1870 and 1960

A period of low fertility rate and low mortality rate since 1960

Rapid increase in the birthrate from 1945-1950

Decline in the death-rate from 1945-1960Japan’s demographic transition was

completed around 1949.

14

Development Economics IPopulation growth

Theoretical Explanation

15

The Malthus Model Hayami (2005), Development Economics p 73-78

16

N

N

G

G

(W)W

The household utility maximization model 　（家計の効用最大化モデル）

Hayami (2005), Development Economics p 73-78In order to understand this model, the concept of

“utility” should be understood.

“A central principle of microeconomics is that households and firms optimize- they do the best they can for themselves given their objectives and the constraints they face.

In microeconomic models, households choose their purchases to maximize their level of satisfaction, which economists call utility, and firms make production decisions to maximize their profits.” (Mankiw, Gregory, “Macroeconomics 5th Edition p12)

17

UtilityUtility is the abstract measure of satisfaction or

happiness that consumers receive from money or goods they own or consume.

18

0

Utility

Amount of Goods

Parent’s utility comes from…Instinctive pleasure, such as love of children

and satisfaction of having heirs.Expected income from children for the

household Security for parents during old age

19

Marginal Utility of Children

20

Utility

Number of Children

Marginal Utility

Number of Children

a

b

c

a b c

Marginal Utility Line

21

MU0

MU0

Marginal Utility

Number of Children

Disutility of having childrenPhysical and psychological hardships in bearing

and rearing childrenCosts paid for child-bearing and rearingOpportunity costs* of parents’ labor used for

child-bearing and rearing*opportunity costs of some items are what one has to

give up to get that item. (Gregory Mankiw, “Principles of Economics 3rd Edition” 2004,

p51)

22

Marginal Disutility Line

23

Marginal Disutility

Number of Children

MD0

MD0

1st phase: The initial equilibrium is found.

24

MD0

MU0

MU0

Marginal Utility / Disutility

Number of Children

MD0

n0

MD0

2nd phase: Shift of marginal utility and disutility line

2nd Phase of demographic changeRightward shift of MUL

Employment and income earning opportunity rises Social security and insurance market do not develop at this phase

Upward shift of MDL Since labor law and primary school system not yet established,

cost to rearing children doesn’t rise so much Opportunity cost of mothers to rear children rises

25

2nd phase: Shifts of utility and disutility lines

26

MU0

MU0

Marginal Utility / Disutility

Number of Children

MD0

n0

MD0

MD1

MD1 MU1

MU1

n1

3rd Phase: Leftward shift of MUL and upward shift of MDLLeftward shift of MUL

Reduced death rate reduced the utility of having children

Increased social mobility decreases possibility that children live with parents together

Further upward shift of MDL Education system develops and education cost of

children rises Opportunity cost of mothers’ to rear children rises

very much

27

Later phase:Shift of utility and disutility lines

28

MU0

MU0

Marginal Utility / Disutility

Number of Children

MD0

n0

MD0

MD1

MD1 MU1

MU1

n1

MU2

MU2

MD2

MD2

n2

Demographic Change in East Asia Can we explain the demographic change in

East Asia by using the household utility maximization model?Which countries belong to the early phase of

MUL analysis?Which countries belong to the 2nd phase of

development?Which countries belong to the 3rd phase of

development?

29

Please consider how to explain by using the utility and disutility linesIn China, parents should pay additional service

fees, like school expenses, when they get a second child. What kind of effects this regulation may have on parents’ behavior.

In Bangladesh, the United Nations try to prevail the primary education by offering free lunch for children in the school. What kind of effects it may have on demographic change in the country?

30

Please explain the two cases described in the former slide.

31

MD0

MU0

MU0

Marginal Utility / Disutility

Number of Children

MD0

n0

MD0

Reference Hayami, Yujiro, “Development Economics” 2005, London Oizumi, Keiichiro, The effect of aging society in ASEAN 4 and

China on macro economic development ( in Japanese) 大泉啓一郎 「 ASEAN4 と中国の少子高齢化とマクロ経済に及ぼす影響」

日本総研 RIM 2004 Vol ４ Mankiw, Gregory “Macroeconomics 5th Ediction” 2003 、 New

York Japan International Cooperation Agency (JICA), “Second Study on

International Cooperation for Population and Development New Insights from the Japanese Experience”, November 2003

http://www.jica.go.jp/english/resources/publications/study/topical/ssic/pdf/ssic_03.pdf

East-West Center, The Future of Population in Asia, Honolulu, http://www.eastwestcenter.org/publications/search-for-publication

s/browse-alphabetic-list-of-titles/?class_call=view&pub_ID=1300 David Canning, The impact of Aging on Asian Development,. ADBI

web site http://www.adb.org/AnnualMeeting/2007/seminars/

presentations/dcanning-presentation.pdf

32