Chapter One: Population Growth and Economic Development

1.1. Introduction
 The key question in this chapter is what is the implication of population growth to
economic development?
 Does population growth promotes economic development or it impedes economic
development?
 How does population growth affect the direction and magnitude of economic
change?
 Population growth has a substantial impact on economic development.
 There are two extreme schools of thought regarding the impact of population growth
on economic development.
 Some theories and researchers maintain that population has a negative impact on
economic development;
o Malthus’s theory of population (Pessimism) by Thomas Robert Malthus.
o While others are convinced that the effect is positive; Boserup’s theory
(Optimistic) by Esther Boserup.
 According to Malthusian theory, the size and growth of the population depend on the food
supply and agricultural methods.
 In the Malthusian view, when food is not sufficient for everyone, the excess
population will die.
 Thomas Malthus states that a growing population lead to depletion of natural
resources and eventually economic collapse.
 In Boserup's theory, agricultural methods depend on the size of the population.
 Boserup argued that in those times of pressure, people will find ways to increase the
production of food by increasing workforce, machinery, fertilizers, etc.
 Esther Boserup states that growing population lead to innovations in the agricultural
sector improving agricultural potential of land and eventually promotes economic
development.
 If Malthus theory is precise, why East Asian countries such as China, India
have developed even if ever-growing population share of the developing world is
revealed by the large size of in comparison with others.
  If Boserup theory is precise, why Sub-Saharan African countries particularly
Ethiopia hasn’t developed yet even if ever-growing population share of the
developing world is revealed by the large size?
 The Answer to both questions is that, the two theories are extreme cases, empirically, the
truth lies between the two.
o The main point is that population growth may be either favorable or unfavorable to
economic development, depending on where, when, and how it takes place.
o The effects of population growth may vary widely, depending on the institutional,
economic, cultural, and demographic setting.
o Country’s population must not exceed beyond certain level; if there is population
densities exceed a critical threshold there may be negative impact on economic
development.
 For example, due to the declining population growth many developed
countries face a serious problem of “ageing society” and experience labor
shortage which puts a strain on their pension systems. On the other hand,
many developing nations experience a rapid population growth which also
affects their economic performance.

1.2. The Basic Issue: Population Growth & Quality of Life

 Population explosion is a phrase which is commonly used to describe the prevalence of high
crude birth rates with low death rates.
 Population growth influence economic development through the determinants of
population growth such as births, deaths, and migration.
 How does population growth affect development? Among the major issues relating to this
basic question are the following:
 Will developing countries be able to improve levels of living given anticipated
population growth?
 How will developing countries deal with the vast increases in their labor forces?
 How will higher population growth rates affect poverty?
 Is there a relationship between poverty and family size?
 Is there a relationship between inequality and population growth?
  Is there a relationship between Population growth and technological innovation?
 Is there a relationship between population growth and pollution and degradation of
natural environment?
 Will developing countries be able to extend the coverage and improve the quality of
health care and education in the face of rapid population growth?
 How does prosperity in the developed world affect the ability of developing countries
to provide for their people?

1.3. Population Growth: Past, Present, and Future World Population Growth throughout
History
 How global demography has changed?
 At the dawn of agriculture, about 8000 B.C., the population of the world was
approximately 5 million.
 Over the 8,000-year period up to 1 A.D. it grew to 200 million (some estimate
300 million or even 600, suggesting how imprecise population estimates of
early historical periods can be), with a growth rate of under 0.05% per year.
 A tremendous change occurred with the industrial revolution: whereas it had taken all
of human history until around 1800 for world population to reach one billion, the
second billion was achieved in only 130 years (1930), the third billion in 30 years
(1960), the fourth billion in 15 years (1974), and the fifth billion in only 13 years
(1987).
 During the 20th century alone, the population in the world has grown from 1.65
billion to 6 billion.
- In 1970, there were roughly half as many people in the world as there are
now.
- Because of declining growth rates, it will now take over 200 years to double
again.
 Today’s world is population passed over seven billion people in 2020.
- Every year, more than 75 million people are being added to the world’s
population.
- Almost all of this net population increase—97%—is in developing countries.
  In 1950 there were 2.5 billion people on the planet; in 2009, estimated to be 6.8 billion
people and in 2020 there are 7.8 billion.
 Projections by the United Nations placed the figure at more than 9.2 billion by the
year 2050 (another widely cited projection is higher, at 9.5 billion).
 Population in the world is currently (2020) growing at a rate of around 1.05% per year
(down from 1.08% in 2019, 1.10% in 2018, and 1.12% in 2017).
 The current average population increase is estimated at 81 million people per year.
 The overwhelming majority of that population will inhabit the developing world.
 Between 1950 and today, an increase of the number of children – that was responsible for
the increase of the world population.
 From now the number of children will barely increase and then start to
decline, but the number of people of working age and old age will increase
very substantially.
 As global health is improving and mortality is falling, the people alive today
are expected to live longer than any generation before us.
 In comparing 1950 and 2018, the number of children born has increased – 97
million in 1950 to 143 million today and that the mortality of children
decreased at the same time.
 According to the projections there will be fewer children born at the end of
this century than today.
 Richer countries have benefited from this transition in the last decades and are now facing
the demographic problem of an increasingly larger share of retired people that are not
contributing to the labor market.
 In the coming decades it will be the poorer countries that can benefit from this demographic
dividend.
1.3.1. Structure of the World’s Population
 The world’s population is very unevenly distributed by geographic region, by fertility and
mortality levels, and by age structures.
 How does median age vary across the world?
 Median age provides an important single indicator of the age distribution of a
population.
 o It provides the age ‘midpoint’ of a population; there are the same numbers of
people who are older than the median age as there are younger than it.
 The global average median age was 29.6 years in 2015 – half of the world
population was older than 29.6 years, and half were younger.
- Japan had the highest median age at 46.3 years.
- The youngest was Niger at 14.9 years.
 Overall that higher-income countries, across North America, Europe, and East Asia tend to
have a higher median age.
 Whereas, Lower-income countries tend to have a lower median age. This is because they
have a ‘younger’ population overall: high fertility rates across these countries mean they
have larger populations of young children and adolescents.
 How do dependency ratios vary across the world?
 It is common in demography to split the population into three broad age groups:
1. Children and young adolescents (under 15 years old)
2. Working-age population (15-64 years) and
3. Elderly population (65 years and older)
 A large share of the population in the working-age is essential to maintain economic
and social stability and progress.
 A large fraction of economically ‘dependents’ relative to those in the working-age
can have negative impacts for labor productivity, capital formation, and savings rates.
 Demographers express the share of the dependent age-groups using a metric called
the ‘age dependency ratio’. This measures the ratio between ‘dependents’ (the sum of
young and old) to the working-age population (aged 15 to 64 years old).
 The majority of countries have a ‘dependent’ population that is 50-60% the size of its
working-age population.
 The young dependency ratio is high across Sub-Saharan Africa in particular.
 The youth dependency ratio is much lower across higher income countries since
fertility rates tend to be much lower there.
 Higher-income countries – particularly across Europe, North America, and
East Asia have the highest old-age dependency ratio; and the inverse is true in
developing countries.
 Geographic Region: more than three-quarters of the world’s people live in developing
countries (Africa, Asia, and Latin America); less than one person in four lives in an
economically developed nation.

Table1: World Population by Region

No. Region Population Net Density Fert. Med. World

(2020) Change (P/Km²) Rate Age Share

1 Asia 4,641,054,775 39,683,577 150 2.2 32 59.5 %

2 Africa 1,340,598,147 32,533,952 45 4.4 20 17.2 %

3 Europe 747,636,026 453,275 34 1.6 43 9.6 %

4 Latin America and 653,962,331 5,841,374 32 2 31 8.4 %

the Caribbean

5 Northern America 368,869,647 2,268,683 20 1.8 39 4.7 %

6 Oceania 42,677,813 549,778 5 2.4 33 0.5 %

 World population by Religion

 According to a recent study (based on the 2010 world population of 6.9 billion) by The
Pew Forum, there are:
 2,173,180,000 Christians (31% of world population), of which 50% are Catholic,
37% Protestant, 12% Orthodox, and 1% other.
 1,598,510,000 Muslims (23%), of which 87-90% Sunnis, 10-13% Shia.
 1,126,500,000 No Religion affiliation (16%): atheists, agnostics, and people who
do not identify with any particular religion. One-in-five people (20%) in the
United States are religiously unaffiliated.
 1,033,080,000 Hindus (15%), the overwhelming majority (94%) of which live in
India.
 487,540,000 Buddhists (7%), of which half live in China).
  405,120,000 Folk Religionists (6%): faiths that is closely associated with a
particular group of people, ethnicity, or tribe.
 58,110,000 Other Religions (1%): Baha’i faith, Taoism, Jainism, Shintoism,
Sikhism, Tenrikyo, Wicca, Zoroastrianism, and many others.
 13,850,000 Jews (0.2%), four-fifths of which live in two countries: United States
(41%) and Israel (41%).
Source: Worldometer (worldometers.info)
Figure1: Population by age bracket with UN projections, World

Source: United Nations, Department of Economic and Social Affairs, Population

Division (2019).
Figure 1 shows the historical population estimates (from 1950 to 2020), and
projections through to 2100 based on UN medium fertility scenarios.
 Important Terms
 Optimum population: this is said to be achieved when the number of people working
with all the available resources produces the highest capital economic return; resulting in
the highest standard of living and quality of life.
 Over population: this is said to occur when there are too many people relative to the
resource and technology available in an area to maintain an adequate standard of living.
  Under population: this occurrence is said to be when there are far more resources in an
area i.e. food production, energy, & minerals than can be made use of by the people
living there.
 Rate of population increase: the growth rate of a population, calculated as the natural
increase after adjusting for immigration and emigration.
 Natural increase: the difference between the birth rate and the death rate of a given
population.
 Net international migration: the excess of persons migrating into a country over those
who emigrate from that country.
 Crude birth rate: the number of children born alive each year per 1,000 population
(often shortened to birth rate) of the given geographical area during the same year.
 Crude death rate: the number of deaths occurring among the population of a given
geographical area during a given year, per 1,000 mid-year total population of the given
geographical area during the same year.
 Total fertility rate (TFR): the number of children that would be born to a woman if she
were to live to the end of her childbearing years and bear children in accordance with the
prevailing age specific fertility rates.
 Life expectancy at birth: the number of years a newborn child would live if subject to
the mortality risks prevailing for the population at the time of the child’s birth.
 Under-5 mortality rate: deaths among children between birth and 5 years of age per
1,000 live births.
 Youth dependency ratio: the proportion of young people under age 15 to the working
population aged 16 to 64 in a country.

1.4. The Hidden Momentum of Population Growth

 Perhaps the least understood aspect of population growth is its tendency to continue even
after birth rates have declined substantially because the large existing youthful population
expands the population’s base of potential parents.
- This means that population grows at national level even if levels of childbearing
declined substantially.
 For countries with above replacement fertility (greater than 2 children per woman), hidden
momentum represents natural increase to the population.
 There are two basic reasons for this:
- First, high birth rates cannot be altered substantially overnight. The social,
economic, and institutional forces that have influenced fertility rates over the course of
centuries do not simply evaporate at the urging of national leaders.
 - Second, the age structure of many developing countries’ populations: in LDCs young
people greatly outnumber their parents. When their generation reaches adulthood, the
number of potential parents will inevitably be much larger than at present.
Figure 2: Population Pyramids: All Developed and Developing Countries and Case of
Ethiopia

 Population pyramid: a graphic depiction of the age structure of the population, with
age cohorts plotted on the vertical axis and either population shares or numbers of
males and females in each cohort on the horizontal axis.

1.5. The Demographic Transition

 Demographic transition is the phasing-out process of population growth rates from a virtually
stagnant growth stage characterized by high birth rates and death rates through a rapid-
growth stage with high birth rates and low death rates to a stable, low growth stage in which
both birth and death rates are low.
 The demographic transition attempts to explain why all contemporary developed nations
have more or less passed through the same three stages of modern population history.
 Stage 1: Before their economic modernization, these countries for centuries had
stable or very slow growing populations as a result of a combination of high birth rates
and almost equally high death rates.
 Stage 2: began when modernization, associated with better public health methods,
healthier diets, higher incomes, and other improvements led to a marked reduction in
mortality that gradually raised life expectancy from under 40 years to over 60 years.
- However, the decline in death rates was not immediately accompanied by a
decline in fertility.
- As a result, the growing divergence between high birth rates and falling death
rates led to sharp increases in population growth compared to past centuries.
- Stage 2 thus marks the beginning of the demographic transition.
 Stage 3: was entered when the forces and influences of modernization and
development caused the beginning of a decline in fertility; eventually, falling birth
rates converged with lower death rates, leaving little or no population growth.

1.6. The Causes of High Fertility in Developing Countries: The Malthusian and Household
Models
1.6.1. The Malthusian Theory of Population
 Thomas Robert Malthus was a famous 18th-century British economist known for the
population growth philosophies outlined in his 1798 book "An Essay on the Principle of
Population”.
 Thomas Malthus has lived from 1776-1834.
 Malthus theorized that populations would continue expanding until growth is stopped or
reversed by disease, famine, war, or calamity.
  The theory states that food production will not be able to keep up with growth in the
human population, resulting in disease, famine, war, and calamity.
 Malthus specifically stated that the human population increases geometrically (i.e. 1,
2, 4, 16, 32, etc.), while food production increases arithmetically (i.e. 1, 2, 3, 4, etc.).
 Under this paradigm, humans would eventually be unable to produce
enough food to sustain themselves.
 He is also known for developing an exponential formula used to forecast population
growth, which is currently known as the Malthusian growth model.
 Because of diminishing returns to the fixed factor, land, food supplies could expand
only at a roughly arithmetic rate.
 In fact, as each member of the population would have less land to work, his or her
marginal contribution to food production would actually start to decline. Because the
growth in food supplies could not keep pace with the burgeoning population, per
capita incomes (defined in an agrarian society simply as per capita food production)
would have a tendency to fall so low as to lead to a stable population existing barely
at or slightly above the subsistence level.
 Malthus therefore contended that the only way to avoid this condition of chronic low
levels of living or absolute poverty was for people to engage in “moral restraint” and
limit the number of their progeny.
 Malthus predicted a catastrophe for the human race.
 Described as pessimistic & barbaric approach.
 He has two solutions to reduce the population growth
 Preventive checks (birth control, moral restraints such as delaying marriage &
celibacy, abortion, infanticide, etc.).
 Positive checks (famine, starvation, & war) usually called Malthusian crisis.
 Modern economists have given a name to the Malthusian idea of a population
inexorably forced to live at subsistence levels of income. They have called it the low-
level equilibrium population trap or, more simply, the Malthusian population trap.
 Malthusian population trap is the threshold population level anticipated by Thomas
Malthus (1766–1834) at which population increase was bound to stop because life sustaining
resources, which increase at an arithmetic rate, would be insufficient to support human
population, which increases at a geometric rate.
 Malthus' idea was that the growth of human population keeps most people in society at a
subsistence level of income.
 As income starts to go up, people produce more children, so the average (or per
capita) income declines or stays at a low level.
 If people are to escape from mere subsistence living, preventive checks on population
growth persuasive (like postponement of marriage, increased cost of food, and even
coercive measures to reduce fertility rates are required.

Figure 2: The Malthusian Population Trap

 Criticisms of the Malthusian Model

 The model does not take adequate account of the role and impact of
technological progress. The Malthusian Theory was based on the assumption that
the law of Diminishing Returns operates in agriculture. Due to this law, agricultural
production fails to keep pace with the growth of population. Malthus could not
visualize that by adopting scientific methods, crop production in agriculture can be
increased manifold.
 The model was based on a hypothesis about a macro relationship between population
growth and levels of per capita income that does not stand up to empirical testing
of the modern period.
 They focus on the wrong variable, per capita income, as the principal determinant of
population growth rates. A much better and more valid approach to the question of
population and development centers on the microeconomics of family size decision
 making in which individual, and not aggregate, levels of living become the principal
determinant of a family’s decision to have more or fewer children.
 Neglects the standard of living: Malthus ignored the fact that as the standard of
living rises in a country, the people begin to marry late. They produce a smaller
number of children in order to maintain their standard of living. Female education
also helps to reduce the size of the family. Thus, expansions of female education and
rise in living standards have the effect of reducing the birth rate in the country.
 Economic Development: Malthus did not realize that economic development can
bring down the birth rate. If the people become more educated, then death rate is
reduced through the increase of medical facilities. People think twice before
increasing their family because they consider the cost of rearing a child and that of
having a car. In this way, the birth rate falls down.

1.6.2. The Microeconomic Household Theory of Fertility

 Microeconomic household theory of fertility states that family formation has costs and
benefits that determine the size of families formed.
- The conventional theory of consumer behavior assumes that an individual with a given
set of tastes or preferences for a range of goods (a “utility function”) tries to maximize
the satisfaction derived from consuming these goods subject to his or her own income
constraint and the relative prices of all goods.
 In the application of this theory to fertility analysis, children are considered as a special kind
of consumption (and in developing countries, particularly low income countries, investment)
good so that fertility becomes a rational economic response to the consumer’s (family’s)
demand for children relative to other goods.
- The usual income and substitution effects are assumed to apply. That is, if other factors
are held constant, the desired number of children can be expected to vary directly with
household income (this direct relationship may not hold for poor societies; it depends
on the strength of demand for children relative to other consumer goods and to the
sources of increased income, such as female employment), inversely with the price
(cost) of children, and inversely with the strength of tastes for other goods relative to
children.
- Mathematically, these relationships can be expressed as follows:

Cd = f(Y, Pc, Px, tx), x = 1. . . N

 where Cd, the demand for surviving children (an important consideration in
low-income societies where infant mortality rates are high), is a function of
the given level of household income (Y), the “net” price of children (the
difference between anticipated costs, mostly the opportunity cost of a
mother’s time, and benefits, potential child income and old-age support, P c),
the prices of all other goods (P x), and the tastes for goods relative to children
(tx).
∂ Cd
> 0 => higher the household income, the greater the demand for children
∂Y
∂ Cd
< 0 => higher the net price of children, the lower the quantity demanded.
∂ Pc
∂ Cd
> 0 => higher the prices of all other goods relative to children, the greater
∂ Px
the quantity of children demanded.
∂ Cd
< 0 => greater the strength of tastes for goods relative to children, the fewer
∂ tx
children demanded.

Figure 3: Microeconomic Theory of Fertility

  Household desires for children are expressed in terms of an indifference map representing
the subjective degree of satisfaction derived by the parents for all possible combinations
of commodities and children.
 Each individual indifference curve portrays a locus of commodity-child combinations
that yield the same amount of satisfaction.
 Any point (or combination of goods and children) on a “higher” indifference curve—that
is, on a curve farther out from the origin—represents a higher level of satisfaction than
any point on a lower indifference curve.
 According to the demand-based theory of fertility, the household chooses from among all
attainable combinations the one combination of goods and children that maximizes family
satisfaction on the basis of its subjectively determined preferences.
 A rise in family income enables the household to attain a higher level of satisfaction by
consuming more of both commodities and children—that is, if children, like most
commodities, are assumed to be normal goods (demand for them rises with income), an
important if in low income countries where children are often in demand primarily as a
source of future financial security.
 Note that as income rises, parents may spend more on each child, preferring a
smaller number of children, each of higher “quality,” for example, healthier
and better educated
 An increase in the price (opportunity cost) of children relative to other goods will cause
households to substitute commodities for children.
 Other factors (namely, income and tastes) being constant, a rise in the relative
price of children causes the household utility-maximizing consumption
combination to occur on a lower indifference curve.
 Note, finally, that if there is a simultaneous increase in household income and net child
price as a result of, say, expanding female employment opportunities and a rise in wages
coupled with a tax on children beyond a certain number per family, there will be both an
outward shift and downward rotation of the budget constraint line.
  In other words, higher levels of living for low income families in combination
with a relative increase in the price of children (whether brought about
directly by fiscal measures or indirectly by expanded female employment
opportunities) will motivate households to have fewer children while still
improving their welfare.
 This is just one example of how the economic theory of fertility can shed light on the
relationship between economic development and population growth as well as suggest
possible lines of policy.

1.6.3. The Demand for Children in Developing Countries

 The economic theory of fertility assumes that the household demand for children is
determined by family preferences for a certain number of surviving (usually male) children
(i.e., in regions of high mortality, parents may produce more children than they actually
desire in the expectation that some will not survive), by the price or “opportunity cost” of
rearing these children, and by levels of family income.
 Children in poor societies are seen partly as economic investment goods in that there is an
expected return in the form of both child labor and the provision of financial support for
parents in old age.
- However, in many developing countries, there is a strong intrinsic psychological
and cultural determinant of family size, so the first two or three children should be
viewed as “consumer” goods for which demand may not be very responsive to
relative price changes.
 The choice mechanism in the economic theory of fertility as applied to developing countries
is assumed, therefore, to exist primarily with regard to the additional (“marginal”) children
who are considered as investments.
- In deciding whether or not to have additional children, parents are assumed to
weigh private economic benefits against private costs.
- The principal benefits are the expected income from child labor, usually on the
farm, and eventual financial support for elderly parents.
- The two principal elements of cost: the opportunity cost of the mother’s time
(income) she could earn if she were not at home caring for her children) and the
 cost of educating children-the financial trade-off between having fewer “high-
quality,” high-cost, educated children with high-income-earning potential versus
more “low.
- Using the same thought processes as in the traditional theory of consumer behavior,
the theory of family fertility concludes that when the price or cost of children rises
as a result of, say, increased educational and employment opportunities for women
or a rise in school fees or the establishment of minimum-age child labor laws or the
provision of publicly financed old-age social security schemes, parents will demand
fewer additional children, substituting, perhaps, quality for quantity or a mother’s
employment income for her child-rearing activities.
- It follows that one way to induce families to desire fewer children is to raise the
price of child rearing by, say, providing greater educational opportunities and a
wider range of higher-paying jobs for young women.
- Recent research on household behavior has led to a major improvement of this
theory. Households in developing countries generally do not act in a “unitary”
manner depicted with this traditional model. Instead, men and women have
different objective functions; for example, husbands may prefer to have more
children than wives.
1.7. Policy Implications for Development and Fertility

 The effect of social and economic progress in lowering fertility in developing countries
will be the greatest when the majority of the population and especially the very poor
share in its benefits.
 Specifically, birth rates among the very poor are likely to fall where the following
socioeconomic changes come to pass:
- An increase in the education of women and a consequent change in their role and
status.
- An increase in female non-agricultural wage employment opportunities, which
raises the price or cost of their traditional child-rearing activities.
- A rise in family income levels through the increased direct employment and
earnings of a husband and wife or through the redistribution of income and assets
from rich to poor.
 - A reduction in infant mortality through expanded public health programs and
better nutritional status for both mother and child and better medical care
- The development of old-age and other social security systems outside the
extended family network to lessen the economic dependence of parents,
especially women, on their offspring.
- Expanded schooling opportunities so that parents can better substitute child
“quality” for large numbers of children.
1.8. Effects of Population Growth on Economic Development: Some Conflicting
Perspectives
 In this section, we discuss two ways of the effect of population growth on economic
development: First, by promoting economic development and second, by retarding economic
development.
 There are two opposing views: Population growth is not a real problem vs. Population
growth is a real problem.
 On the one hand, we must recognize that population growth is not the only, or even the
primary, source of low levels of living, eroding self-esteem, and limited freedom in
developing nations.
 It’s Not a Real Problem
 We can identify three general lines of argument on the part of people who assert that
population growth is not a cause for concern:
1. The problem is not population growth but other issues.
2. Population growth is a false issue deliberately created by dominant rich country
agencies and institutions to keep developing countries in their dependent
condition.
3. For many developing countries and regions, population growth is in fact
desirable.
 The real problem is not population growth but the following,
 Underdevelopment
 World resource depletion and environmental destruction
 Population Distribution
 Subordination of women
 It Is a Real Problem
 Positions supporting the need to curtail population growth because of the negative
economic, social, and environmental consequences are typically based on one of the
following three arguments.
1.8.1. Factors Promoting Economic Development
 Kuznets, Lewis, Meier and other economists have shown that the growth of population has
been an important factor in the economic growth of developed countries in the following
ways:
 Increase in Per Capita Product. Prof. Kuznets in his study Modern Economic Growth has
pointed out that substantial rates of population growth in Europe have led to high rates of
increase in total product and per capita product.
 The growth of total product and per capita product has been accompanied by growth
of national product. The growth of national product, in turn, has been due to the
enormous addition to population which has led to large increase in working labor
force.
 Kuznets points out that, “in modern times growth in population has been
accompanied by growth in aggregate output for many countries so large that there
was also a marked secular rise in per capita product.”
 Rise in Labor Productivity. The rise in the rate of per capita product is the result of rise in
labor productivity.
 It is improvement in the quality of labor which increases productivity per unit of
labor. This means a rise in the efficiency of labor which leads to greater output per
unit of labor.
 Studies made by Schultz, Harbison, Kendrick, Solow and a host of other economists
reveal that one of the important factors responsible for the rapid growth of American
economy has been the increase in labor productivity.
 According to Prof. J.K. Galbraith, a large part of America’s industrial growth has
been from improvements brought about by improved men.
 Population Growth leads to Growth of Physical Capital.
  It has been proved by recent researches that the growth of physical capital stock
depends to a considerable extent on human capital formation which is the “process of
increasing knowledge, the skills, and the capacities of all people of the country”.
 The spread of education, knowledge, and know-how raise the level of skills and
physical efficiency of the people and thus increase the productivity of physical
capital. The latter, in turn, raises the national product.
 Population Growth leads to Age of High Mass-Consumption.
 Rostow has shown in his Stages of Economic Growth that during the “take-off stage”
when the growth rate of population was high, the rate of net investment rose by 5-10
per cent of national income. This led to the development of “leading sectors” due to
increase in the effective demand for their products. This paved the way for the Age of
High Mass-Consumption through which almost all developed countries are passing.
 Thus population growth leads to increase in the production of goods and ultimately to
the extensive use (consumption) of automobiles, durable consumers’ goods and
household gadgets
 Population Growth as a Source of Capital Formation. According to Nurkse1 and Lewis2,
high population growth can be a source of capital formation in under developed countries.
 Nurkse points out that under developed countries suffer from disguised
unemployment on a mass scale. This surplus labor force can be put to work on capital
projects like irrigation, drainage, roads, railways, houses, etc. They can be supplied
simple spare tools by farmers and food by their families. In this way, surplus rural
labor force can be a source of capital formation.
 On the other hand, Prof. Lewis suggests that economic development takes place when
capital accumulates with the withdrawal of surplus labor from the rural sector and its
employment in the industrial sector. Such workers are paid the subsistence wage rate
which is less than the prevailing market wage rate. This leads to profits which are
invested by capitalists for capital formation.
1.8.2. Factors Retarding Economic Development
 The consequences of population growth on the development of underdeveloped countries
(UDCs) are not the same because the conditions prevailing in these countries are quite
1
R. Nurkse, Problems of Capital Formation in Underdeveloped Countries, 1951.
2
W. A. Lewis “Economic Development with Unlimited Supplies of Labor, “Manchester School,” May 1954.
 different from those of the developed economies. These economies are poor, capital-scarce,
and labor-abundant.
 Population growth adversely affects their economic development in the following ways:
 Overuse of Resources: rapid population growth tends to overuse the country’s natural
resources. This is particularly the case where the majority of people are dependent on
agriculture for their livelihood.
 With rapidly rising population, agricultural holdings become smaller and un-
remunerative to cultivate. There is no possibility of increasing farm
production through the use of new land (extensive cultivation).
 Consequently, many households continue to live in poverty. In fact, rapid
population growth leads to the overuse of land, thereby endangering the
welfare of future generations. Even in countries where natural resources are
untapped such as Brazil and other Latin American countries, rapidly
increasing population makes it difficult to invest in roads, public services,
drainage and other agricultural infrastructure needed to tap such resources.
 Urbanization: with rapidly growing population, it becomes difficult to manage the
adjustments that accompany economic and social change.
 Urbanization in undeveloped countries (UDCs) creates such problems as
housing, power, water, transport, etc.
 Besides, growing population threatens permanent environmental damage
through urbanization in some rural areas.
 Per Capita Income: the effect of population growth on per capita income is unfavorable.
 The growth of population tends to retard the per capita income in three ways:
1. It increases the pressure of population on land.
2. It leads to rise in costs of consumption goods because of the scarcity of the
cooperant factors to increase their supplies.
3. It leads to a decline in the accumulation of capital because with increase in
family members, expenses increase.
 Investment: faster population growth makes the choice more scarce between higher
consumption now and the investment needed to bring higher consumption in future.
Economic development depends upon investment.
  In UDCs the resources available for investment are limited. Therefore, rapid
population growth retards investment needed for higher future consumption.
 Standard of Living. Since one of the important determinants of the standard of living is the
per capita income, the factors affecting per capita income in relation to population growth
equally apply to the standard of living.
 A rapidly increasing population leads to an increased demand for food products,
clothes, houses, etc. But their supplies cannot be increased in the short run due to lack
of cooperant factors like raw materials, skilled labor, capital, etc. Consequently, their
costs and prices rise which raise the cost of living of the masses. This brings down
further the already low standard of living.
 Poverty breeds large number of children which increases poverty further, and the
vicious circle of poverty, more children and low standard of living continues.
 But Hirschman and Colin Clark opine that population pressures leading to lowering
of standards will encourage the people of UDCs to work hard in order to improve their
standard of living.
 Agricultural Development. In UDCs, people mostly live in rural areas, Agriculture is their
main occupation. So with population growth the land-man ratio is disturbed. Pressure of
population on land increases because the supply of land is inelastic.
 It adds to disguised unemployment and reduces per capita productivity further. As the
number of landless workers increases, their wages fall. Thus low per capita
productivity reduces the propensity to save and invest. As a result, the use of improved
techniques and other improvements on land are not possible.
 Capital formation in agriculture suffers and the economy is bogged down to the
subsistence level.
 The problem of feeding the additional population becomes serious due to acute
shortage of food products. These have to be imported which increases the balance of
payments difficulties. Thus, the growth of population retards agricultural development
and creates a number of other problems discussed above.
 Employment: a rapidly increasing population plunges the economy into mass
unemployment and under-employment.
  As population increases, the proportion of workers to total population rises. But in the
absence of complementary resources, it is not possible to expand jobs. The result is that
with the increase in labor force, unemployment and under-employment increases.
 A rapidly increasing population reduces incomes, savings, and investment. Thus capital
formation is retarded and job opportunities are reduced, thereby increasing
unemployment.
 Moreover, as the labor force increases in relation to land, capital and other resources,
complementary factors available per worker decline. As a result, unemployment and
underemployment increase. UDCs have a backlog of unemployment which keeps on
growing with the rapidly increasing population. This tends to raise the level of
unemployment manifold as compared with the actual increase in labor force.
 Social Infrastructure: rapidly growing population necessitates large investments in social
infrastructure and diverts resources from directly productive assets.
 Due to scarcity of resources, it is not possible to provide educational, health, medical,
transport and housing facilities to the entire population. There is over-crowding
everywhere. As a result, the quality of these services goes down. To provide these social
infrastructure requires huge investment.
 Environment: rapid population growth leads to environmental damage.
 Scarcity of land due to rapidly increasing population pushes large number of people to
ecologically sensitive areas such as hillsides and tropical forests.
 It leads to overgrazing and cutting of forests for cultivation leading to severe
environmental damage.
 Moreover, the pressure of rapid growth of population forces people to obtain more food
for themselves and their livestock. As a result, they over-cultivate the semi-arid areas.
This leads to desertification over the long run when land stops yielding anything.
 Besides, rapid population growth leads to the migration of large numbers to urban areas
with industrialization. This results in severe air, water, and noise pollution in cities and
towns.
 Capital Formation: population growth retards capital formation.
  As population increases, per capita available income declines. People are required to
feed more children with the same income. It means more expenditure on consumption
and a further fall in the already low savings and consequently in the level of investment.
 Further, a rapidly growing population by lowering income, savings, and investment
compels the people to use a low level technology which further retards capital
formation.
 World Economy: rapid population growth also affects UDCs in relation to the world
economy in a number of ways.
1. Rapid population growth tends to increase income disparities between UDCs and
developed countries because the per capita incomes decline with growth in numbers in
the former.
2. Rapid population growth encourages international migration. Immigration labor from
poor countries adversely affects the wages of native workers and also creates social and
political tension in the developed (host) countries.
3. Emigration tends to increase wages of workers substantially at home.
4. But another beneficial effect of this is that emigrants remit large sums of money back
home. This increases family income and their living standards at home. Such families
spend more on food, clothing and on modern household gadgets. Thus they lead more
comfortable lives. Some repay family debts, while others invest in agricultural land and
urban real estate. On their return, some enterprising persons start new ventures and
others expand family-owned commercial and manufacturing businesses.
5. Further, remittances by emigrants help finance the countries balance of payments
deficit. UDCs are great losers because of the ‘brain drain’ when professional and
technical workers emigrate to other countries. They subsidize the educational costs of
such personnel but are unable to tax their income. The money they remit is insignificant
as compared with the above two types of losses. Often the best of the brains are allowed
to settle permanently in the employing country which is a permanent loss to the home
country.
6. With rapid population growth the domestic consumption of even exportable goods
increases. Consequently, there is a decline in the exportable surplus. On the other hand,
to meet the demand of rapidly increasing population, more food and other consumer
 goods are required. It leads to an increase in imports of such goods along with those of
capital goods needed for the development. Reduction in exports and increase in imports
lead to deterioration in the balance of payments position of the country. This may force
the state to curtail the importation of capital goods which will adversely affect
economic development of the country.
 Concluding Remark: the consequences of a rapidly increasing population are to retard
all development efforts in an under developed country unless accompanied by high
rates of capital accumulation, and technological progress. But these counteracting
factors are not available and the result is that population explosion leads to declining
agricultural productivity, low per capita income, low living standards, mass
unemployment, low rate of capital formation, and adverse balance of payments.

1.8.3. Goals and Objectives: Toward a Consensus

 In spite of what may appear to be seriously conflicting arguments about the positive and
negative consequences of population growth, a common ground has emerged on which
many people on both sides of the debate can agree.
 The following three propositions constitute the essential components of this intermediate or
consensus opinion.
 Population growth is not the primary cause of low levels of living, extreme inequalities,
or the limited freedom of choice that characterize much of the developing world. The
fundamental causes of these problems must be sought, rather, in the plight of poor
families, especially women, and the failure of other aspects of domestic and
international development policy.
 The problem of population is not simply one of numbers but involves the quality of life
and material well-being. Thus developing country population size must be viewed in
conjunction with developed-country affluence in relation to the quantity, distribution,
and utilization of world resources, not just in relation to developing countries’
indigenous resources.
 Rapid population growth does serve to intensify problems of underdevelopment and
make prospects for development that much more remote. As noted, the momentum of
growth means that, barring catastrophe, the population of developing countries will
increase dramatically over the coming decades, no matter what fertility control
measures are adopted now. It follows that high population growth rates, though not the
principal cause of underdevelopment, are nevertheless important contributing factors in
specific countries and regions of the world.
 In view of these three propositions, we may conclude that the following three policy goals
and objectives might be included in any realistic approach to the issue of population growth
in developing countries.
 In countries or regions where population size, distribution, and growth are viewed as
an existing or potential problem, the primary objective of any strategy to limit further
growth must deal not only with the population variable per se but also with the
underlying social and economic conditions of underdevelopment. Problems such as
absolute poverty, gross inequality, widespread unemployment (especially among
women), limited female access to education, malnutrition, and poor health facilities
must be given high priority. Their amelioration is both a necessary concomitant of
development and a fundamental motivational basis for the expanded freedom of the
individual to choose an optimal—and in many cases, smaller—family size.
 To bring about smaller families through development-induced motivations, family-
planning programs providing both the education and the technological means to
regulate fertility for people who wish to regulate it should be established.
 Developed countries should help developing countries achieve their lowered fertility
and mortality objectives not only by providing contraceptives and funding family-
planning clinics but, even more important, by curtailing their own excessive depletion
of nonrenewable world resources through programs designed to cut back on the
unnecessary consumption of products that intensively use such resources; by making
genuine commitments to eradicating poverty, illiteracy, disease, and malnutrition in
developing countries as well as their own; and by recognizing in both their rhetoric
and their international economic and social dealings that development is the real
issue, not simply population control.

1.8.4. Some Policy Approaches

 What Developing Countries Can Do?
 In line with these broad objectives, LDCs government should rather adopt the following
approaches in order to reduce overall population growth in the long-run:
- Persuasion of people to have smaller families through the media and the educational
process, both formal (school system) and informal (adult education).
- Enhance family-planning programs to provide health and contraceptive services to
encourage the desired behavior.
- Manipulate economic incentives and disincentives for having children—for example,
through the elimination or reduction of maternity leaves and benefits, the reduction or
elimination of financial incentives, or the imposition of financial penalties for having
children beyond a certain number; the establishment of old-age social security
provisions and minimum-age child labor laws; the raising of school fees and the
elimination of heavy public subsidies for higher education; and the subsidization of
smaller families through direct money payments.
- Governments can attempt to coerce people into having smaller families through the
power of state legislation and penalties.
 - Raise the social and economic status of women and hence create conditions favorable
to delayed marriage and lower marital fertility. The empowerment and autonomy of
women and the improvement of their political, social, economic and health status are
essential for the achievement of sustainable development and for the long-term
success of population programs. Experience shows that population and development
programs are most effective when steps have simultaneously been taken to improve
the status of women.
1.9. How Developed Countries Can Help Developing Countries with Their Population
Programs?
 There are a number of ways in which the governments of rich countries and multilateral
donor agencies can help the governments of developing countries achieve their population
policy objectives sooner.
- Research into technology of fertility control, the contraceptive pill, modern
intrauterine devices (IUDs), voluntary sterilization procedures, and, particularly in
the age of AIDS, effective barrier contraception.
- Financial assistance for family planning programs, public education, and national
population policy research activities in the developing countries.
- Assistance to poor countries in their development efforts, particularly in sub-Saharan
Africa. Such genuine support would consist not only of expanded public and private
financial assistance but also of improved trade relations, such as tariff- and quota-
free access to developed-country markets, more appropriate technology transfers,
and assistance in developing indigenous scientific research capacities, better
international commodity-pricing policies, and a more equitable sharing of the
world’s scarce natural resources.

References
- Michael P. Todaro, Stephen C. Smith (2011). Economic Development, 11th Edition (The
Pearson Series in Economics)
- M.L. Jhingan (2014). The Economics of Development and Planning, 40th Edition.
- R. Nurkse, Problems of Capital Formation in Underdeveloped Countries, 1951.
- W. A. Lewis “Economic Development with Unlimited Supplies of Labor, “Manchester
School”, May 1954.
- Worldometer (worldometers.info)

“End of Chapter One”