Chapter 7 - Population, page 1 of 9

two questions underlie this chapter:

1. is population growth a threat to economic development?
2. what should be done about population growth?
population growth and development:
the Solow growth model suggests faster population growth leads to a lower
per capita income
however, the effect of population growth on development is uncertain;
although most economists believe population growth is bad for development,
the empirical evidence is unclear
economic development leads to lower population growth; however, it is
unclear if lower population growth leads to greater development
developing countries could offer family planning as a health measure, which
could reduce population growth
the history of human population can be divided into 4 epochs:
1. the pre-agricultural era (until about 10,000 years ago):
in this era, the population was limited by the hunting, gathering, and
fishing carrying capacity of the environment; the invention of agriculture
allowed the land to support a greater number of people
it is estimated that there were between 10 million to 100 million humans
living at the end of the pre-agricultural era
it is estimated that there were at least 60,000 years or as much as 3
million years of human history in the pre-agricultural era, depending on
where one draws the line between anatomically modern humans and
similar ancestors
population densities were low during this era
2. from the invention of agriculture to the beginning of the Industrial
Revolution (around 1800):
agriculture developed at different rates in different parts of the world
as agriculture spread, population densities increased
by the beginning of the Industrial Revolution, the human population had
increased to 1.7 billion (about 17 times greater than it was 10,000 years
before)
3. the Industrial Revolution to World War II (1945):
the world population growth rate during this period was higher than it
was during the first two eras
by 1945 the world population was about 2.5 billion
4. post-World War II:
the world population doubled to about 5 billion by 1990 and increased to
about 6 billion in 2000
by some estimates, most people who have lived are alive today
will the world population continue to grow rapidly?
if the world population continues to grow rapidly, in 100 years the world
population would be about 30 billion
however, various factors will probably eventually stop the human
population from growing further; according to Malthus, when income per
person is greater than the subsistence level, the population grows because
families that have an income level greater than the subsistence level will
have more children; the additional children reduce income per person back to
the subsistence level

Chapter 7 - Population, page 2 of 9

however, population growth slows without Malthusian checks; empirically,
the opposite of what Malthus expected is observed groups with higher
incomes have lower fertility rates
the demographic transition:
the crude birth rate is defined as the number of births per thousand people
the crude death rate is defined as the number of deaths per thousand
people
the rate of natural increase is defined as the crude birth rate minus the
crude death rate; the rate of natural increase is usually adjusted to percent
terms (that is, it is adjusted to per hundred people); for example, if the birth
rate is 38 per thousand and the death rate is 28 per thousand, then the rate
of natural increase is (38-28)/1000 = 10/1000 = 1/100 = 1%; the rate of
natural increase is the rate at which the population grows, excluding
immigration and emigration
as a society become richer, the death rate declines; the decline in the
death tends to precede that in the birth rate
page 250, figure 7-1 the birth and death rates in England and Wales from
1750 to 1950
rates per
thousand
birth rate

death rate

1750

1950

the vertical distance between the birth rate and the death rate is the
rate of natural increase; the smaller the gap between the birth rate
and the death rate, the lower the population growth rate
as a country develops, the population growth rate increases; with
further development, the population growth rate decreases as the birth
rate approaches the death rate; this trend is illustrated in the figure
above by the gap between the birth rate and death rate
page 251, figure 7-2 illustrates the birth and death rates in Ceylon (Sri
Lanka) from 1905-1995:

Chapter 7 - Population, page 3 of 9

rates per
thousand
birth rate

death rate
1905

1995

the death rate drops because of improved healthcare technology

(immunizations, antibiotics, etc.) and better sanitation
why does the birth rate decline after the decline in the death rate?
perhaps families have an ideal family size in mind; when death rates
are high, they will have more children to meet this target; for example,
if the infant mortality rate is 1/3, then parents might have 3 or more
children to ensure that at least one survives into adulthood to take
care of the parents in old age; however, if children have a 95% chance
of survival into adulthood, then the parents might have only one child
as larger families become less necessary, cultural norms could still
encourage people to have many children; cultural norms that
encourage large families could change slowly over time
the rate of natural increase in a country increases as the gap between the
birth rate and the death rate grows; this could be why the population growth
rate in some developing countries is so high; extrapolating to where the birth
rate is about equal to the death rate suggests that the population size will
stabilize close to the replacement rate
there is cross-country evidence that suggests the population growth rate in
a country will eventually stabilize; for instance, some European countries
have a fertility rate below the replacement level
there is a negative correlation between the level of income and the
population growth rate in intercountry and intracountry data: the population
growth rate is highest in the poorest countries; in countries with high
inequality, the poorest households and the poorest regions have the highest
fertility
population growth decline because of greater average income per capita
(and possibly because of higher levels of education)
a change in the structure of the economy contributes to the decline in the
birth rate because people are employed for wages instead of in subsistence
agriculture or in household activities:
this might especially affect women who enter the labor force; having
children to care for might not impact womens household or
agricultural productivity (for example, they could tie young children to
their back and work); however, they cannot take care of children while
in the modern sector labor force; thus, when women work for wages,
the opportunity cost of having children increases because they must
forego income

Chapter 7 - Population, page 4 of 9

additionally, the benefits of having children decrease and the cost of
children increase as an economy modernizes
empirical evidence for the demographic transition:
page 253, table 7-1 the total fertility rate by region and GNP per capita:
the total fertility rate (TFR) is defined as the number of live births
expected in a womans lifetime (the average number of children a
woman bears over her lifetime), this is similar to the birth rate, but the
latter is also influenced by the age structure of the population
the TFR in all regions decreased from 1970 to 1997
by income group, the countries with income less than $1000 per
capita PPP have the highest fertility rate
table 7-2 the rate of natural increase by region and GNP per capita:
the rate of natural increase is highly correlated with the fertility rate
the rate of natural increase varies from 0%in Eastern Europe and
Central Asia to 2.6% in sub-Saharan Africa
the world rate of natural increase is 1.4%
population extrapolations:
all models predict the world population will stabilize in 100 to 150 years
however, what the population will be and when it will stabilize are
uncertain; different estimates suggest the population will stabilize between
10 billion and 15 billion
an economic model of choice of family size the Becker model:
this model is attributed to Gary Becker from the University of Chicago
this model assumes that having children is a rational choice and analyzes
the number of children a family has using economic analysis (costs and
benefits of having additional children)
the benefits of having additional children:
1. consumption - children can be thought of as a consumer good
2. economic contributions to household
3. insurance in poorer societies without elaborate social security
measures, people cannot save towards old age and have children
as a way to support them
the costs of having additional children:
1. direct financial costs the cost of raising children varies with living
standards
2. foregone income during childbearing and child rearing - if a woman
leaves the workforce while she is pregnant or in the early years of
her childrens lives
3. possible psychic costs
the number of children a family has decreases as society becomes more
modernized and industrialized and as more production is done outside the
household because the benefits of having more children decrease and the
costs of having more children increase:
the benefits of additional children decrease:
1. there are fewer ways children can contribute to household
income
2. the insurance effect of an additional child decreases a)
because the existing children have a higher chance of
surviving to adulthood and taking care of their parents in old
age and b) because public insurance (such as social security)

Chapter 7 - Population, page 5 of 9

and private insurance become more available as a countrys
average income increases
the costs of having additional children increase:
1. the expected standard of living rises as a countrys average
income increases
2. as incomes rise, there is a greater incentive to invest in
childrens education, and education is expensive (parents can
choose between child quality and child quantity)
child quality vs. child quantity
parents who have a given amount of resources to use in raising
children can choose between having many children or having fewer
children
if parents choose to have fewer children, these children will have
greater human capital, better health and well-being, and greater
productive potential than the several children the parents could have
had otherwise
as incomes rise, parents will choose to have fewer children (who
have higher quality) than before
the demographic transition and a declining birth rate:
in the demographic transition, the death rate declines before the
birth rate; during the lag between the declines, the population in a
country grows quickly because of the large gap between the birth and
death rates:
rates

birth rate
lag
difference between birth rate
and death rate decreases to
zero
death rate
time

during this time lag, peoples expectation about how many of their
children will survive changes; as the death rate decreases, people
realize that a greater proportion of their children will survive and they
will have fewer children, so the birth rate will start to decline
fertility, costs and benefits, and social norms:
according to Richard Easterlin, fertility is based on both costs/benefits and
social norms
however, social norms might be a function of the nature of the economy;
for instance, if there is not much investment in children (in their health, etc.)
and children have a high chance of death, then a social/cultural norm might
encourage having many children
social norms change slowly, they could even be considered autonomous
fertility and female education:
the strongest influence on reducing fertility is female education

Chapter 7 - Population, page 6 of 9

from a policy standpoint, this suggests that promoting the education of
female children will help reduce the population growth rate
some East Asian countries have relatively high female education (and a
smaller gap between female and male education) and lower population
growth rates; South Asia and sub-Saharan Africa have less female education
(and a greater gap between female and male education) and have higher
population growth rates
why might females have fewer children if they are more educated?
presumably, educated women have a greater intellectual
understanding of costs and benefits of having children, which
influences their fertility decisions
uneducated women might not understand choice or how to exercise
it
with education, womens attitudes might modernize and women
might be able to play alternative roles
educated women earn higher wages thus, the foregone income
from having more children is larger for educated women than
uneducated women
the future of population growth:
simple models that predict standing room only are probably wrong because
of the pattern shown by history; rapid population growth will probably end
eventually
rapid population growth will probably end because as economic
development occurs, people prefer smaller families and the demographic
transition occurs
is population growth harmful to development?
the evidence for population growth harming development is ambiguous
regression models can show the correlation between an independent
variable (which include initial income, investment rate, income inequality,
and population growth rate) and the growth rate of income per capita:
growth rate
of income
per capita

independent variable
regressions which include the growth rate of population among their
explanatory variables and the growth rate of income per capita as their
dependent variable do not show a clear relationship
why might population growth be expected to be harmful to development?
for a given saving rate, the greater the population growth rate is, the
less capital per worker is available and income per worker is less (this
is explained by the Solow model)
for a given level of expenditure on education, the higher the
population growth rate is, the less education per child is available; the

Chapter 7 - Population, page 7 of 9

demographic structure of countries with high population growth rates
shows a large proportion of the population is less than age 15 if there
are more people of school age (thus, more dependents per worker),
then there is less income per person (assuming a given income per
worker) than if the demographic structure were more even; thus, there
is less education per child (what the working population can afford to
spend on education is spread out over more children)
there is a controversy over whether population growth hurts development:
1. there is no clear correlation between the population growth rate
and the rate of growth of per capita income
2. however, there is a strong correlation between population density
and income growth; East Asia, China, Japan, and Korea and also to a
lesser degree India and Southeast Asia have been developing faster
than other less densely-populated countries; thus, a high population
density is not necessarily bad for development
the textbook concludes that most economists believe that population
growth is harmful to development in the short-run (not all economists agree),
but the evidence for this is weak
the theory of optimum population:
this is a theoretical model and is not based on actual data; according to this
model, as a countrys population increases, its per capita income will initially
increase but then decrease beyond a certain population size:
per capita
income

Smithian
region

Malthusian
region
population

the first part of this curve is termed the Smithian region (named after
Adam Smith); in this region, per capita income increases as population
increases for two reasons:
1. greater division of labor (specialization) the division of labor
(specialization) of both firms and workers within the firms is limited
by the size of the markets for their goods; firms will not be very
specialized and will not use very specialized labor when markets for
their products are small; however, if the market sizes increase
because population grows, then both the firms and workers within
the firms can specialize further, which raises both the firms and
workers productivity
2. lower transportation costs as people live closer to each other, the
cost of transportation decreases because it is more efficient to have
a dense network of railroads, roads, etc. than have an infrastructure
that is broadly spread out
the second part of this curve is termed the Malthusian region (named after
Thomas Malthus); in this region, per capita income decreases as population
increases because a country is assumed to have a fixed quantity of resources

Chapter 7 - Population, page 8 of 9

as more people are added to the country, marginal productivity of labor
decreases because of diminishing returns to the fixed quantity of resources
it is possible that countries never enter the Malthusian region because of
technological change; technological change has the effect of pushing the
curve out:
per capita
income

Smithian
region

Malthusian
region
population

according to this model, some countries might be too sparsely populated to

have the efficiencies present at higher population sizes; for these countries,
population growth could be beneficial to income per capita in the long run
(however, population growth should be slow because rapid population growth
will still have the negative effects discussed earlier)
alternatively, some countries might have developed early on both dense
populations and centralized government, commerce, agriculture, etc. which
led to a social and cultural evolution; their economic culture rather than
their population density per se may have led to faster economic growth in
recent times than in societies that did not develop early on; for example,
China vs. New Guinea
population policy there are several possible interventions to reduce the
population growth rate:
1. do nothing about population growth itself, except foster development:
it could be that the best way to reduce population growth is to increase
the standard of living
however, it is also possible that lower population growth rates lead to a
higher standard of living; for instance, East Asian countries grew partially
because they underwent the demographic transition earlier and had a
higher income per capita because of a low population growth rate
Marxists, radicals, etc. argue take care of the population and the
population will take care of itself; according to this view, population
control policies for developing countries promoted by groups in rich
countries (such as the Rockefeller Foundation) are genocidal in nature;
instead of using population policies, if the standard of living of poor people
is raised, then population growth will decline on its own
2. improving education, especially of women:
especially improving education in primary (also secondary) school in
countries where many do not receive enough education to be even literate
3. offering health education:
such as a) offering family planning services and techniques as health
care measures and b) disseminating information about family planning
4. offering incentives to have fewer children:
for example, Singapore offered access to government subsidized
apartments and tax breaks to people with fewer children; this policy was

Chapter 7 - Population, page 9 of 9

reversed because the government wanted educated people (who were
having fewer children in exchange for these benefits) to have more
children
5. inducements/threats:
for example, a campaign under Indira Ghandi in India offered a free
transistor radio in exchange for sterilization
for example, in the early 1980s China decided the optimum population
was about 700 million, when it already had over 1 billion people; to reduce
the size of the population, China implemented a one child per family
restriction and enforced it using penalties and incentives; the fertility rate
dropped below the replacement rate for a long time, but not all families
adhered to the one family/one child rule (urban families averaged about 1
child per family and rural families averaged about 2 children per family);
inducements/threats will not be accepted where personal liberties are
more respected
demographic momentum:
after implementing the one family/one child plan, the fertility rate in China
dropped below the replacement rate; however, the population continued to
grow why?
if the proportion of women of child-bearing age is high in a country and the
fertility rate is low (such as 2), the number of children born as a fraction of
the countrys population is still large thus, the population growth rate
remains high, even though fertility is low
this population bulge at the younger ages in a populations demographic
structure takes a while to settle out this is referred to as demographic
momentum; demographic momentum explains the echo of the Baby Boom
in the U.S. also