Demography and Development

Topic 1
Why do economists want to explain demographic
behaviour? Transition theory and the Malthusian model

Sriya Iyer
Faculty of Economics and St. Catharine’s College
University of Cambridge
Contents
 Recent demographic patterns in developing economies

 Explaining past and current trends in population

– theory of ‘demographic transition’
– Malthusian model
– microeconomic household demand model

 Demographic and economic literature on

– macro- and micro reproductive externalities
– social norms and social interactions
– mortality and missing women

 General policy debates about population

 Specific population debates in India, China, Kenya, the Middle East and Sub-Saharan Africa

 Course outline handout provides:

– Essential reading for course
– Specific reading for each topic (also available on Faculty website)
– Suggested supervision questions

2
Why do economists want to explain demographic behaviour?

 Historical trends in population growth

 ‘Population bomb’ or ‘population explosion’ - is population harmful or beneficial for economic

development?

 Contemporary population debates echo what Malthus set out on 7 June 1798 in the Preface to his
An Essay on the Principle of Population:

 ‘It is an obvious truth…that population must always be kept down to the level of the means of
subsistence… and it is a view of these means which forms the strongest obstacle in the way to any
very great future improvement of society.’

3
What are the main trends in population growth throughout the last two
millennia?
Year World Pop Year World Pop Year World Pop Year World Pop

1 AD 300m 1800 950m 1933 2,057m 1995 5,716m

1500 600m 1850 1,200m 1950 2,515m 2000 6,130m

1750 800m 1900 1,650m 1985 4,800m 2030 8,200m*

*Projected estimate, based on current trends

 Natural population increase occurs when the birth rate is higher then the death rate

 An individual’s country’s population growth compared to ‘world population growth’

 Growth rate: Worldwide population growth rate is 1.5% per year, and this is expected to continue

 Size: In absolute numbers, the population is growing by about 230,000 people a day

 Regional imbalance: 90% of this increase is forecast to be in less developed countries

4
5
What are the differences between historical trends in population
growth and current trends in global population?

 Mortality trends: 20C LDC mortality lower than in 19C LDCs.

 DR/BR balance: DR decline preceded the decline in BR by 20 years.

 The result: very high rates of population growth of 3-4% a year. 20C LDC fertility is 150% greater
than the maximum achieved in 19C.

 Post 1960 and ‘demographic momentum’: birth rates have also been declining rapidly in most
LDCs.

 Strong regional differences: between LDCs, Sub-Saharan Africa and the Middle East

6
What is the empirical association between population and economic
development?

Region Average Fertility GNP per capita ($)*  Inverse relationship: higher average income
Rate (1995) (1995) <=> lower fertility. Sub-Saharan Africa (4-6
Sub-Saharan Africa 5.7 490 children) vs. East Asia and Latin America (2-3
children).
Middle East and 4.2 1780
North Africa
South Asia 3.5 350
 Outliers: Middle East, China, India

Latin America and 2.8 3320  Faster growth during the 20C than during the
the Caribbean
19C, particularly in LDCs.
East Asia and the 2.2 800
Pacific
 Related to the balance between trends in
Europe and Central 2.0 2220
Asia mortality and fertility.
China 1.9 620
 Direction of causation between population and
India 3.2 340 development unclear
World 2.9 4880

7
Is population growth good or bad for economic development?

 Improvement in development indicators: World food production, infant survival, life expectancy at
birth, literacy have all improved despite rapid population growth

 Positive externalities of human genius (Boserup, Simon)

 Models of endogenous growth: new ideas or knowledge are main source of economic growth;
population growth increases markets for goods and services.

 Are poor people in LDCs irrational?

 Is a collection of reasoned decisions at the individual level always optimal at the collective level?

 What are the resource allocation failures in the context of childbearing?

8
What are the major sources of possible negative externalities of high
fertility and fast population growth?

 Savings & investment (esp. human capital investment)

 Environmental externalities (esp. well-defined property rights) and the ‘tragedy of the commons’

 Social norms – ‘Marshallian atmospheric externalities’

 Theories to explain population growth in developing economies:

– Theories of ‘demographic transition’
– Malthusian theories
– Microeconomic ‘household demand’ models
– Models of ‘social interactions’

9
10
What demographic patterns does ‘demographic transition’ theory
identify?
 ‘Stage I = High birthrates & high deathrates
– typical birthrate 35 per 1000,
– typical deathrate 30 per 1000.
– slow population growth of 0.5% p.a.

 Stage II = modernization
– Deathrates fall from 30 per 1000 to 20 per 1000
– life expectancy rises from <40 to >60
– Birthrates stay high (35 per 1000)
– fast pop. growth of 1.5% p.a.

 Stage III = further modernization

– falls from 35 per 1000 to 10 per 1000
– deathrate continues to fall to 10 per 1000
– Birthrate & deathrate converge, and population growth is zero or very slow

11
What are the problems with ‘demographic transition’ theory?

 Demographic transition theory is purely descriptive

 Differences in transition for some present-day LDCs from the western European experience

 First difference in Stage I. Before 1950, LDCs had birthrates (at 43 per 1000) & deathrates (at
37 per 1000) much higher than Europe at same stage

 Second difference in Stage II. Deathrate did begin to fall in most LDCs from 1950. But much
faster than in 19C LDCs to 10 or 15 per 1000. So, instead of growing only at 1.5% p.a., 20C LDC
populations grew at 2-2.5% p.a

 Third and most crucial difference is in Stage III. Consider 2 cases A and B on diagram.
Majority of LDCs (sub-Saharan Africa) still in Case B. Failure to experience entire mortality
decline of Stage II because of widespread & persistent poverty

12
Thomas Robert Malthus (1766-1834)

13
How did Malthus explain the relationship between population and
economic development?

 ‘The view that he has given of human life has a  The Malthusian model:
melancholy hue, but he feels conscious that he
has drawn these dark tints from a conviction  Population grows at a geometric rate
that they are really in the picture, and not from
a jaundiced eye or an inherent spleen of  Food supply grows at an arithmetic rate
disposition. The theory of mind which he has
sketched accounts for the existence of most of  The ‘very striking consequence’: per capita
the evils of life!’ incomes fall to subsistence

 Thomas Robert Malthus, An Essay on the  Avoid absolute poverty by indulging in ‘moral
Principle of Population (1798) restraint’

14
What 3 assumptions underlie the ‘population trap’ theory?

 Diminishing returns to scale in production.

 Positive income effect on fertility.

 Reproductive behaviour homogeneous across economy.

 What is the ‘population trap’? (See Figure 1)

 Point A = Malthusian ‘population trap’ level of income is attained, economy stuck at chronic low income, Y1.

 Point A is a stable equilibrium

 For poor nations to overcome population pressures, they will need

– Malthusian preventive checks such as delayed marriage and birth control
– Malthusian positive checks such as starvation/disease/wars will restrain population

15
16
How do we get out of the Malthusian trap?

 A "big push" far enough away from point A to What

 What does
does the
the Malthusian
Malthusian ‘population
‘population
escape forces pushing economy back into trap’
trap’ theory
theory not
not explain?
explain?
equilibrium.
 The
 The Industrial
Industrial Revolution
Revolution
 Types of "big push" to get to Point B:

 Shape
Shape of
of Y
Y curve:
curve: technological
technological progress
progress
 On the P curve. By ‘preventive checks’ e.g.
family limitation programmes 
 Shape
Shape ofof PP curve:
curve: mortality
mortality and
and fertility
fertility don’t
don’t
relate
relate to
to income
income in
in predicted
predicted way
way
 On the Y curve. An investment &
industrialization programme  Poverty
 Poverty in
in India
India in
in the
the nineteenth
nineteenth century
century

17
The views of Malthus’ contemporaries

 ‘It begins with the assumption that population tends to increase in a geometrical ratio while
subsistence can at best be made to increase in only an arithmetic ratio – an assumption just as
valid, and no more so, than it would be, from the fact that a puppy doubled the length of his tail
while he added so many pounds to his weight, to assert a geometric progression of the tail and an
arithmetic progression of the weight… the savants of a previously dogless island might deduce the
‘very striking consequence’ that by the time the dog grew to a weight of fifty pounds his tail would
be over a mile long and extremely difficult to wag, and hence recommend the prudential check of a
bandage as the only alternative to the positive check of constant amputations.’

Henry George, Progress and Poverty (1879)

18
Can we draw lessons from Malthusian theory today?

 Inevitable effect of population on the standard of living

 Influence on policy-making and model-building in economics

 But, Malthusian theories are flawed by the assumptions of diminishing returns and of a positive
income effect on fertility

 => We need a better theory of the relationship between population and economic
development!

19
Useful Reading (the most important are starred)
On the relation between population and development J.-C. Chesnais, The Demographic Transition: Stages, Patterns
and Economic Implications. Oxford: Oxford University Press
(1992).
*A. C. Kelley, ‘Economic consequences of population change in
the Third World’, Journal of economic literature 26 (1988).
A. J. Coale and S. C. Watkins, The Decline of Fertility in Europe.
Princeton: Princeton University Press (1986).
*N. Birdsall, ‘Analytical approaches to population growth’, in H.
Chenery & T. N. Srinivasan (eds.), Handbook of development
economics vol. 1 (1988).
On the Malthusian model
P. Dasgupta, ‘The population problem: Theory and evidence’,
Journal of economic literature 33, 1879-1902 (1995). T. R. Malthus, An Essay on the Principle of Population, P. James
(ed.) 2 volumes, Cambridge (1989).
World Bank, World development report 1984: Population (1984).
S. Hollander, The Economics of Thomas Robert Malthus, Studies
World Bank, Beyond economic growth Chapter III on ‘World in Classical Political Economy IV, University of Toronto Press
Population Growth’ (2000). (1997), esp. 13-69.

On demographic transition theory *D. R. Weir, ‘Malthus’s theory of population’, in J. Eatwell et al.
(eds.), The new Palgrave: Economic development (1987),
236-231.
*J. C. Caldwell, ‘Towards a restatement of the demographic
transition theory’ Population and Development Review 2(3-4),
321-366 (1976).

20