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Population Growth and Economic DevelopmentNovember 21, 2011Kyoto UniversityJunichi Mori11Population Growth is still an issue.

2UNPF, Sate of World Population 2004, P8http://www.unfpa.org/upload/lib_pub_file/327_filename_en_swp04.pdf2Population explosion (concentrates on poor regions3

http://www.worldbank.org/depweb/english/modules/social/pgr/map1a.html3Developed countriesDeveloping countriesAverage 1% About 2.5%Endogenous phenomenon by economic growthExogenous phenomenon by importation of health & medical technologies4The Characteristics of Population GrowthKUINEPIn an economic model, an endogenous change is one that comes from inside the model and is explained by the model itself. An exogenous change is one that comes from outside the model and is unexplained by the model.endogenous (exogenous (4Population growth and economic development5Exogenous (EndogenousExogenous population explosion is not paralleled by increase in employment and income. Developing economics face with the serious problem of resource exhaustion, economic degradation, and destitution.KUINEP5Correlation between population growth and economic growth 6Optimum population growth acceleration of economic growthOver and under population growth constraint on economic growthPopulation growth, which occurs in parallel with GNP growth would result in: - further acceleration of economic growth - enlargement of markets including products market and labor market - induction into specialization KUINEP6Negative Influence of population growth on economy7If the population growth of a country is faster than the growth rate of GNP, then it has negative impact on the economy.population growth GNP per capita decreases purchasing power decreases substantially shrinkage of various markets including products and labor market vicious circle (shown as in Malthus model)

KUINEP7Population Growth81. Natural increaseThe natural rate of Population growth (NR) = the birth- rate (BR) - the death-rate (DR)Social increase- Migration

KUINEP89

123BRDRThe Theory of Demographic Transition9Three phases of population growthChange in the birth- and death rates in the UK

10KUINEPHayami (2005)10Why is the theory of demographic transition important? To look for patterns which help explain changes in population growth rate

To help predict changes in population growth rate and effective ways of controlling it1111The population of Japan since the Jomon era12

Source: 16http://www8.cao.go.jp/shoushi/whitepaper/w-2004/html-h/index.html12Japans demographic transition

13KUINEPJICA (2003)13The cause of decline in mortality rates from the beginning of the Meiji Era (1870s) to just beforeWWII is not as fully analyzed as is that for the decline experienced by Western countries in the 18thand 19th centuries. However, all of the following three factors worked together: the achievement anddissemination of modern medicine and public health under the direction of the government,improvements in the quality of life and nutritional levels through economic growth, and the increasedprevalence of concepts of sanitation through the extension of compulsory education.Mortality rates declined sharply during the post-war baby bust period. Reduced mortalityresulted from an increase in the use of antibiotics and DDT following the war, which sharply reducedthe number of infectious diseases such as pneumonia, gastroenteritis, and tuberculosis. As a result,average life expectancy increased and had reached 65 for men and 70 for women by 1960, almostcatching up with the minimum level in developed Western countries.A number of factors are thought to have contributed to the rapid decline in fertility after 1949,with one of the fi rst being the Eugenic Protection Law, established in 1948 and later revised threetimes. This law sanctioned relatively easy access to induced abortions, resulting temporarily in thegeneral use of induced abortion as the main method of fertility control for married couples. Followingthis, however, due to the popularization of family planning through both the public and private sectors,contraception replaced induced abortion as the primary method of fertility control (see Figure 2-2,p.20).

Phases of Japans demographic transitionA period of high fertility rate and high mortality rate until 1870A period of high fertility rate and low mortality rate between 1870 and 1960A period of low fertility rate and low mortality rate since 1960

Rapid increase in the birthrate from 1945-1950 Decline in the death-rate from 1945-1960Japans demographic transition was completed around 1949.1414Development Economics IPopulation growth Theoretical Explanation1515The Malthus Model Hayami (2005), Development Economics p 73-78

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GG(W)

16The household utility maximization modelHayami (2005), Development Economics p 73-78In order to understand this model, the concept of utility should be understood.

A central principle of microeconomics is that households and firms optimize- they do the best they can for themselves given their objectives and the constraints they face. In microeconomic models, households choose their purchases to maximize their level of satisfaction, which economists call utility, and firms make production decisions to maximize their profits. (Mankiw, Gregory, Macroeconomics 5th Edition p12)

1717UtilityUtility is the abstract measure of satisfaction or happiness that consumers receive from money or goods they own or consume.180UtilityAmount of Goods18Parents utility comes fromInstinctive pleasure, such as love of children and satisfaction of having heirs.Expected income from children for the household Security for parents during old age1919Marginal Utility of Children20UtilityNumber of ChildrenMarginal UtilityNumber of Childrenabcabc20Marginal Utility Line21MU0MU0Marginal UtilityNumber of Children21Disutility of having childrenPhysical and psychological hardships in bearing and rearing childrenCosts paid for child-bearing and rearingOpportunity costs* of parents labor used for child-bearing and rearing*opportunity costs of some items are what one has to give up to get that item. (Gregory Mankiw, Principles of Economics 3rd Edition 2004, p51)

2222Marginal Disutility Line23Marginal DisutilityNumber of ChildrenMD0MD0231st phase: The initial equilibrium is found.24MD0MU0MU0Marginal Utility / DisutilityNumber of ChildrenMD0n0MD0242nd phase: Shift of marginal utility and disutility line2nd Phase of demographic changeRightward shift of MULEmployment and income earning opportunity risesSocial security and insurance market do not develop at this phaseUpward shift of MDLSince labor law and primary school system not yet established, cost to rearing children doesnt rise so muchOpportunity cost of mothers to rear children rises25252nd phase: Shifts of utility and disutility lines

26MU0MU0Marginal Utility / DisutilityNumber of ChildrenMD0n0MD0MD1MD1MU1MU1n1263rd Phase: Leftward shift of MUL and upward shift of MDLLeftward shift of MULReduced death rate reduced the utility of having childrenIncreased social mobility decreases possibility that children live with parents together

Further upward shift of MDLEducation system develops and education cost of children risesOpportunity cost of mothers to rear children rises very much

2727Later phase:Shift of utility and disutility lines28MU0MU0Marginal Utility / DisutilityNumber of ChildrenMD0n0MD0MD1MD1MU1MU1n1MU2MU2MD2MD2n228Demographic Change in East Asia Can we explain the demographic change in East Asia by using the household utility maximization model?Which countries belong to the early phase of MUL analysis?Which countries belong to the 2nd phase of development?Which countries belong to the 3rd phase of development?2929Please consider how to explain by using the utility and disutility linesIn China, parents should pay additional service fees, like school expenses, when they get a second child. What kind of effects this regulation may have on parents behavior.In Bangladesh, the United Nations try to prevail the primary education by offering free lunch for children in the school. What kind of effects it may have on demographic change in the country?3030Please explain the two cases described in the former slide.31MD0MU0MU0Marginal Utility / DisutilityNumber of ChildrenMD0n0MD031ReferenceHayami, Yujiro, Development Economics 2005, LondonOizumi, Keiichiro, The effect of aging society in ASEAN 4 and China on macro economic development ( in Japanese) ASEAN4 RIM 2004 Vol Mankiw, Gregory Macroeconomics 5th Ediction 2003New YorkJapan International Cooperation Agency (JICA), Second Study on International Cooperation for Population and Development New Insights from the Japanese Experience, November 2003http://www.jica.go.jp/english/resources/publications/study/topical/ssic/pdf/ssic_03.pdfEast-West Center, The Future of Population in Asia, Honolulu,http://www.eastwestcenter.org/publications/search-for-publications/browse-alphabetic-list-of-titles/?class_call=view&pub_ID=1300 David Canning, The impact of Aging on Asian Development,. ADBI web sitehttp://www.adb.org/AnnualMeeting/2007/seminars/presentations/dcanning-presentation.pdf

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