Population Growth and Economic Development –
Detailed Exam Notes
These notes are simplified academic notes prepared from Chapter 9 of Debraj Ray’s Development Economics. The
notes are arranged topic-wise exactly according to the chapter flow so that they become easy to revise for university
exams. Only economic concepts and theory are included. Case studies and country examples are avoided wherever
possible. Important diagrams and tables from the chapter are included along with easy explanations.
9.1 Introduction
Population growth refers to the increase in the number of people living in a country or the world over time.
Development economics studies how population growth and economic development influence each other.
Main ideas:
• Population growth affects income, employment, food supply, housing, education, and health.
• Economic development also changes fertility and mortality behaviour.
• Population and development are interconnected.
• Economists generally measure welfare in per capita terms, meaning income and resources available per person.
Two important debates:
1. Population pessimism – larger population reduces resources per person.
2. Population optimism – larger population may create innovation, labour supply, and technological progress.
The chapter mainly studies:
• Birth rates and death rates
• Age distribution
• Demographic transition
• Fertility decisions
• Population growth and economic development
9.2.1 Birth Rates and Death Rates
Birth rate means the number of births per 1,000 people in one year.
Death rate means the number of deaths per 1,000 people in one year.
Population growth rate = Birth rate – Death rate
Example:
If birth rate = 30 per 1,000
and death rate = 10 per 1,000,
then population growth rate = 20 per 1,000 = 2%.
Important concepts:
• High birth rate increases population.
• High death rate reduces population.
• If birth rates remain higher than death rates, population grows rapidly.
• Poor countries often have high birth rates.
• Developed countries usually have low birth and low death rates.
Economic significance:
• High population growth creates pressure on resources.
• Governments must spend more on food, schools, hospitals, and employment.
• Rapid growth may reduce per capita income growth.
9.2.2 Age Distribution
Age distribution means the proportion of people in different age groups within a population.
Main age groups:
• Children (0–15 years)
• Working-age population (15–64 years)
• Old-age population (65+ years)
Important ideas:
• Developing countries usually have younger populations.
• Developed countries have older populations.
• A younger population means more future population growth because many people enter reproductive age.
Age-specific fertility rate:
Average number of children born to women in a specific age group.
Total fertility rate:
Total number of children a woman is expected to have during her lifetime.
Important economic effects:
• Young populations increase future labour supply.
• But they also increase dependency burden.
• Governments need higher spending on education and healthcare.
• Population growth has inertia because a large young population continues producing births even if fertility declines.
9.3.1 Demographic Transition
Demographic transition explains how population changes as countries develop economically.
Phase 1: High Birth Rate + High Death Rate
• Population growth is low.
• Common in pre-industrial societies.
• Poor healthcare and food shortages keep death rates high.
Phase 2: High Birth Rate + Falling Death Rate
• Population growth becomes very high.
• Improvements in sanitation, medicine, and food reduce deaths.
• Birth rates remain high because fertility behaviour changes slowly.
Phase 3: Falling Birth Rate + Low Death Rate
• Population growth slows.
• Families choose fewer children.
• Urbanisation, education, and higher incomes reduce fertility.
Importance:
• Almost all countries pass through these stages.
• Developing countries are mainly in Phase 2 or Phase 3.
9.3.2 Historical Trends
Historically, developed countries experienced population transition slowly over centuries.
Developing countries experienced faster transitions because:
• Medical technology already existed.
• Vaccines and sanitation spread quickly.
• Mortality fell rapidly.
Difference between developed and developing countries:
• Developed countries had gradual decline in death rates.
• Developing countries saw sudden decline in death rates.
• Fertility rates in developing countries remained high for longer periods.
Result:
Rapid population explosion in many developing countries.
9.3.3 Adjustment of Birth Rates
Birth rates do not fall immediately after death rates decline because of inertia.
Macro-inertia:
Population remains young due to earlier high birth rates.
Even if fertility declines, many young adults continue having children.
Micro-inertia:
Families continue preferring large families because of social and economic reasons.
Reasons for high fertility:
1. Lack of social security
Children become support during old age.
2. Missing insurance markets
Poor households use children as economic security.
3. Child mortality
Families have more children because some children may die.
4. Poverty
Poor households depend on children for labour and future support.
5. Gender bias
Preference for sons increases fertility.
6. Low opportunity cost of women
When female wages are low, cost of childbearing remains low.
7. Unemployment
Low employment opportunities reduce opportunity cost of having children.
Hoarding vs Targeting
Hoarding:
Parents have many children in advance because future survival and income are uncertain.
Targeting:
Parents wait to see whether earlier children survive before deciding to have more children.
Targeting generally reduces fertility compared to hoarding.
Costs of Children
Children involve both direct and indirect costs.
Direct costs:
• Food
• Clothing
• Healthcare
• Education
Indirect costs:
• Income lost while taking care of children
• Especially affects women’s labour participation
Economic theory:
• If income rises without increasing opportunity cost, fertility may rise.
• If female wages rise, opportunity cost of children rises.
• This may reduce fertility.
9.3.4 Is Fertility Too High?
Economists argue fertility may become socially excessive because private decisions create social costs.
Reasons:
1. Imperfect information
Families may not know mortality has fallen.
2. Risk and uncertainty
Parents overestimate future insecurity.
3. Externalities
Large population creates pressure on public resources.
Negative effects of excessive fertility:
• Pressure on schools and hospitals
• Environmental degradation
• Lower savings
• Higher unemployment
• Poverty persistence
Policy implications:
• Female education
• Better healthcare
• Social security systems
• Family planning
• Employment generation
• Reduction in gender discrimination
Figure 9.1
This figure explains how income changes affect fertility decisions.
Panel (a):
When income rises from non-wage sources like rent or property income, the budget line shifts outward parallelly.
Families can afford more children and more goods, so fertility may rise.
Panel (b):
When wages rise, especially female wages, the opportunity cost of children also rises because time spent on child care
reduces income opportunities.
The budget line rotates outward.
This creates two effects:
• Income effect → increases fertility
• Substitution effect → reduces fertility
The final effect on fertility becomes uncertain, but fertility usually rises less compared to non-wage income increases.
Table 9.1
This table compares birth rates, death rates, and population growth rates across countries.
Main conclusion:
• Poor countries generally have high birth and death rates.
• Middle-income countries experience falling death rates first.
• Developed countries have low birth and death rates.
This table supports the demographic transition theory.
Table 9.2
This table shows age distribution across world regions.
Main observation:
• Developing regions have a very large young population.
• Developed regions have higher elderly population.
Economic meaning:
Young populations increase future population growth and dependency burden.
Table 9.3
This table explains historical changes in world population distribution.
Main idea:
• Developed countries increased population share during industrialisation.
• Developing countries later experienced faster population growth.
It shows long-term demographic transition across regions.
Final Revision Summary
• Population growth depends mainly on birth rates and death rates.
• Age structure affects future population trends.
• Demographic transition explains changing population patterns during development.
• Death rates usually fall before birth rates.
• Fertility remains high because of poverty, insecurity, child mortality, and gender bias.
• Children are often viewed as economic support in developing economies.
• Rising female wages and education generally reduce fertility.
• Excessive population growth creates pressure on economic development.
• Social security, healthcare, and education help reduce fertility rates.