24
The Demographic Transition: Three Centuries of Fundamental Change Ronald Lee B efore the start of the demographic transition, life was short, births were many, growth was slow and the population was young. During the transi- tion, rst mortality and then fertility declined, causing population growth rates rst to accelerate and then to slow again, moving toward low fertility, long life and an old population. The transition began around 1800 with declining mortality in Europe. It has now spread to all parts of the world and is projected to be completed by 2100. This global demographic transition has brought momentous changes, reshaping the economic and demographic life cycles of individuals and restructuring populations. Since 1800, global population size has already increased by a factor of six and by 2100 will have risen by a factor of ten. There will then be 50 times as many elderly, but only ve times as many children; thus, the ratio of elders to children will have risen by a factor of ten. The length of life, which has already more than doubled, will have tripled, while births per woman will have dropped from six to two. In 1800, women spent about 70 percent of their adult years bearing and rearing young children, but that fraction has decreased in many parts of the world to only about 14 percent, due to lower fertility and longer life. 1 These changes are sketched in Table 1. These trends raise many questions and controversies. Did population grow so 1 With e(0) 5 27.5, I assume that women cared for young children from ages 20 to 50, so that the fraction of adult life spent giving care is de ned in terms of life table functions as (T(20) – T(50))/T20 5 71 percent, where T(x) is the survival weighted number of person years lived above age x. With e(0) 5 77.5, I assume women care for young children from ages 25 to 33, so that the fraction of adult life spent giving care is (T(25) – T(33))/T(20) 5 14 percent. y Ronald Lee is Professor of Demography and Economics, University of California, Berkeley, California. His e-mail address is ^[email protected]&. Journal of Economic Perspectives—Volume 17, Number 4—Fall 2003—Pages 167–190

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Page 1: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

The Demographic Transition ThreeCenturies of Fundamental Change

Ronald Lee

Before the start of the demographic transition life was short births weremany growth was slow and the population was young During the transi-tion rst mortality and then fertility declined causing population growth

rates rst to accelerate and then to slow again moving toward low fertility long lifeand an old population The transition began around 1800 with declining mortalityin Europe It has now spread to all parts of the world and is projected to becompleted by 2100 This global demographic transition has brought momentouschanges reshaping the economic and demographic life cycles of individuals andrestructuring populations Since 1800 global population size has already increasedby a factor of six and by 2100 will have risen by a factor of ten There will then be50 times as many elderly but only ve times as many children thus the ratio ofelders to children will have risen by a factor of ten The length of life which hasalready more than doubled will have tripled while births per woman will havedropped from six to two In 1800 women spent about 70 percent of their adultyears bearing and rearing young children but that fraction has decreased in manyparts of the world to only about 14 percent due to lower fertility and longer life1

These changes are sketched in Table 1These trends raise many questions and controversies Did population grow so

1 With e(0) 5 275 I assume that women cared for young children from ages 20 to 50 so that the fractionof adult life spent giving care is dened in terms of life table functions as (T(20) ndash T(50))T20 571 percent where T(x) is the survival weighted number of person years lived above age x With e(0) 5775 I assume women care for young children from ages 25 to 33 so that the fraction of adult life spentgiving care is (T(25) ndash T(33))T(20) 5 14 percent

y Ronald Lee is Professor of Demography and Economics University of California BerkeleyCalifornia His e-mail address is ^rleedemogberkeleyeduamp

Journal of Economic PerspectivesmdashVolume 17 Number 4mdashFall 2003mdashPages 167ndash190

slowly before 1800 because it was kept in equilibrium by Malthusian forces Didmortality begin to decline because of medical progress because of rising per capitaincome or for some other reason Did fertility begin to fall because of improvedcontraceptive technology and family planning programs or were couples optimiz-ing their fertility all along and reduced it in response to changing economicincentives Are we approaching a biological limit to life expectancy or can weexpect to see continuing or even accelerating longevity gains Some predictionssuggest that global fertility is projected to fall to 20 children per woman but inEurope it has been only 14 for some time and in east Asia it is 18 why should weexpect fertility decline to stop at 20 Low fertility and increasing longevity cause adramatic change in the population age distribution with a ten-fold increase in theratio of elderly to children Will the societal costs of the elderly be catastrophic Inthe past there has been great concern that rapid population growth in third-worldcountries would prevent economic development but most economists have down-played these fears Similarly environmentalists fear that world population is alreadyabove the carrying capacity of the biosphere while most economists are compla-cent about the projected 50 percent increase in population over this century In thispaper I will describe these demographic changes in greater detail and I will alsotouch on these questions and controversies

Before the Demographic Transition

According to a famous essay by Thomas Malthus rst published in 1798 slowpopulation growth was no accident Population was held in equilibrium with the

Table 1Global Population Trends Over the Transition Estimates Guesstimatesand Forecasts 1700ndash2100

Life Expectancy(Years at Birth)

Total Fertility Rate(Births per Woman)

Pop Size(Billions)

Pop Growth Rate(Year)

Pop 15( of Total Pop)

Pop 65( of Total Pop)

1700 27 60 68 050 36 41800 27 60 98 051 36 41900 30 52 165 056 35 41950 47 50 252 180 34 52000 65 27 607 122 30 72050 74 20 892 033 20 162100 81 20 946 004 18 21

Source Population numbers and growth rates for 1700 are taken from Biraben (1980) and for 1800 fromUnited Nations (1999) The gures for TFR and e(0) are best guesses by the author consistent with thepopulation growth rate based on Coale-Demeny (1983) Model South Female stable populations with anaverage age of childbearing of 31 and should not be treated as data The gures on age distribution arelikewise based on these model stable populations Data for 1900 are from Chamie (2001) for 1950ndash2050from United Nations (2003) and for 2100 from United Nations (2000)

168 Journal of Economic Perspectives

slowly growing economy Faster population growth would depress wages causingmortality to rise due to famine war or diseasemdashin short misery Malthus called thismortality response the ldquopositiverdquo check Depressed wages would also cause post-ponement of marriage resulting in prostitution and other vices including contra-ception this he called the ldquopreventiverdquo check Since population could potentiallygrow more rapidly than the economy it was always held in check by misery and vicewhich were therefore the inevitable human lot Economic progress could help onlytemporarily since population could soon grow to its new equilibrium level wheremisery and vice would again hold it in check Only through moral restraintmdashthatis the chaste postponement of marriagemdashdid Malthus believe that humanity mightavoid this fate and he thought this an unlikely outcome

For preindustrial Europe at least Malthus seems to have been right Popula-tion was held weakly in equilibrium by the positive and preventive checks Whenweather disease or political disturbance knocked population out of equilibriumreal wages and rents reacted strongly (Lee 1987 1997 Lee and Anderson 2002)and the checks brought population slowly back to equilibrium

In western Europe in the centuries before 1800 marriage required the re-sources to establish and maintain a separate household so age at rst marriage forwomen was late averaging around 25 years and a substantial share of women nevermarried (Flinn 1981 p 84 Livi-Bacci 2000 pp 99 ndash107) Although fertility washigh within marriage the total fertility rate (TFR) was moderate overall at four to ve births per woman (Livi-Bacci 2000 p 136) Mortality was also moderately highwith life expectancy at birth between 25 and 35 years (Flinn 1981 pp 92ndash101Livi-Bacci 2000 pp 61ndash90)2 but this was heavily in uenced by high mortality ininfancy and childhood Population growth rates were generally low averaging03 percentyear before 1700 in western Europe but sometimes rising above1 percent in the nineteenth century3 In Canada and the United States marriagewas much earlier because land was abundant and population at rst grew rapidlybut then decelerated in the nineteenth century

Outside of Europe and its offshoots fertility and mortality were higher in thepretransitional period and change in fertility and mortality came later Data onmortality or fertility are only occasionally available for third-world countries beforeWorld War II (Preston 1980) In India in the late nineteenth century life expec-tancy averaged in the low 20s and was highly variable while fertility was six or seven

2 The Total Fertility Rate is the sum across all ages of the birth rates at each age and therefore measuresthe total number of births a surviving woman would have over her reproductive life either actually fora generation of women or hypothetically for a given calendar year which is the more common usageLife expectancy at birth is the average age at death for an actual generation or hypothetically the averageage at death implied by the age-speci c death rates in a given calendar year which is the more commonusage3 A population with a Total Fertility Rate of 45 and life expectancy at birth of 30 grows at 05 percentper year (based on Coale-Demeny 1983 stable population models with a mean age of childbearing of31)

Ronald Lee 169

births per woman (Bhat 1989) In Taiwan the picture was similar around 1900Widespread data on fertility for the decades after World War II con rm that totalfertility rates in the third world were typically six or higher However recent worksuggests that the demographic situation in China may have been closer to theEuropean experience than previously thought (Lee and Feng 1999)

Although pretransitional fertility was typically high in third-world countries itslevels were far below the hypothetical biological upper limit for a population (asopposed to an individual) which is around 15 to 17 births per woman (Bongaarts1978) The contraceptive effects of prolonged breastfeeding often combined withtaboos on sex while breastfeeding led to long birth intervals and reduced fertilityAbortion was also important and sometimes the practice of coitus interruptus hadan important effect In some settings marriage patterns also limited fertilityalthough not as strongly as in western Europe

At the aggregate level population growth throughout the regions of the worldwas slow over the past millennium but there was a puzzling similarity in long swingsabout the growth path such as stagnation in the fourteenth and seventeenthcenturies and more rapid growth in the fteenth and eighteenth centuries Whileexchanges of disease through exploration and trade may have played some roleglobal climatic change was probably the main driving force (Galloway 1986)

Mortality Declines Fertility Declines and Population Growth

The classic demographic transition starts with mortality decline followed aftera time by reduced fertility4 leading to an interval of rst increased and thendecreased population growth and nally population aging I will consider thesemajor stages in turn

Mortality DeclinesThe beginning of the worldrsquos demographic transition occurred in northwest

Europe where mortality began a secular decline around 1800 In many low-incomecountries of the world the decline in mortality began in the early twentieth centuryand then accelerated dramatically after World War II

The rst stage of mortality decline is due to reductions in contagious andinfectious diseases that are spread by air or water Starting with the development ofthe smallpox vaccine in the late eighteenth century preventive medicine played arole in mortality decline in Europe However public health measures played animportant role from the late nineteenth century and some quarantine measuresmay have been effective in earlier centuries Improved personal hygiene alsohelped as income rose and as the germ theory of disease became more widely

4 There are cases in which fertility declined rst notably the United States and France

170 Journal of Economic Perspectives

known and accepted Another major factor in the early phases of growing lifeexpectancy is improvements in nutrition Famine mortality was reduced by im-provements in storage and transportation that permitted integration of regionaland international food markets smoothing across local variations in agriculturaloutput Secular increases in incomes led to improved nutrition in childhood andthroughout life Better-nourished populations with stronger organ systems werebetter able to resist disease Life expectancy is still positively associated with heightin the industrial country populations plausibly re ecting childhood health condi-tions (Fogel 1994 Barker 1992)

The high-income countries of the world have largely attained the potentialmortality reductions due to reductions in infectious disease and increases innutrition In recent decades the continuing reduction in mortality is due toreductions in chronic and degenerative diseases notably heart disease and cancer(Riley 2001) In the later part of the century publicly organized and fundedbiomedical research has played an increasingly important part and the humangenome project and stem cell research promise future gains

Many low-income populations did not begin the mortality transition until sometime in the twentieth century However they then made gains in life expectancyquite rapidly by historical standards In India life expectancy rose from around24 years in 1920 to 62 years today a gain of 48 years per calendar year over 80 yearsIn China life expectancy rose from 41 in 1950ndash1955 to 70 in 1995ndash1999 a gain of65 years per year over 45 years Such rapid rates of increase in low-incomecountries will surely taper off as mortality levels approach those of the globalleaders

There is a range of views on where mortality is headed during the comingdecades On the optimistic side Oeppen and Vaupel (2002) offer a remarkablegraph that plots the highest national female life expectancy attained for eachcalendar year from 1840 to 2000 The points fall close to a straight line starting at45 years in Sweden and ending at 85 years in Japan with a slope of 24 years perdecade If we boldly extend the line forward in time it reaches 975 years bymid-century and 109 years by 2100

Less optimistic projections are based on extrapolation of trends in age-speci cdeath rates over the past 50 or 100 years This approach implies more modest gainsfor the high-income nations of the world with average life expectancy approaching90 years by the end of the twenty- rst century (Lee and Carter 1992 TuljapurkarLi and Boe 2000)

Oddly some of the most pessimistic estimates of the future improvement inlife expectancy come from of cial government projections For example actuariesfor the US Social Security Administration project life expectancy of 83 years for2080 (sexes combined) Their projections are in line with the views of researcherswho believe that it will become increasingly dif cult to achieve gains as we ap-proach biological limits to human longevity (Olshansky and Carnes 2001) How-ever past projections by of cial government agencies of longevity gains have been

The Demographic Transition Three Centuries of Fundamental Change 171

systematically too low relative to actual outcomes (Keilman 1997 National Re-search Council 2000) Indeed old-age mortality has been declining at an acceler-ating rate in recent decades (Kannisto Lauritsen Thatcher and Vaupel 1994) Itis at the younger ages that declines have been slower

For a closer look at mortality trends it is convenient to use the United Nationsclassi cation of countries according to their recent economic development status asMore Developed Countries Less Developed Countries and Least Developed Coun-tries The More Developed Countries with 12 billion people include all of Europeplus North America Japan Australia and New Zealand The Least DevelopedCountries with 07 billion include most of sub-Saharan Africa plus BangladeshCambodia and a few other countries All other countries are Less Developedincluding India China and the bulk of the worldrsquos populationmdash 42 billion people5

One can question the relevance of using membership based on recent experienceto categorize groups of countries in earlier periods or far in the future but on netthis division seems useful

Figure 1 plots global trends in life expectancy since 1950 and UN projectionsto 2050 For the Least Developed Countries life expectancy rises from 357 years in1950ndash1954 to 487 years in 1995ndash1999 or 29 years per year For the Less DevelopedCountries the increase has been from 418 to 654 years or 52 years per year a veryrapid increase indeed For the More Developed Countries the increase has beenfrom 661 to 748 or 19 years per year6

While the overall increase in life expectancy is marked two recent counter-vailing trends deserve mention Figure 1 shows a stagnation in mortality gains forthe Least Developed Countries in the 1990s re ecting increasing mortality fromHIVAIDS in sub-Saharan Africa In the past 20 years more than 60 million peoplehave been infected by HIVAIDS worldwide of whom 40 million are still alive Ofthese cases only 6 percent are in More Developed Countries while in sub-SaharanAfrica HIVAIDS has become the leading cause of death The United Nationsprojects that in some African countries more than two-thirds of children aged15 years in 2000 will become infected with HIVAIDS before they reach 50 years ofage (United Nations 2002) For the 35 countries in Africa most affected lifeexpectancy at birth has been reduced on average by 65 years in the late 1990s aneffect that is projected to rise to 90 years in 2000ndash2005

The other main exception to the generally favorable recent trends in mortalityis found in countries of eastern Europe and former territories in the Soviet Unionwhich have experienced stagnating or declining life expectancy over the past two orthree decades predating the dif culties of the transition to market economies

5 In UN terminology the Less Developed Countries include the Least Developed Countries as a subsetunless otherwise indicated In this paper however these categories are mutually exclusive6 In this gure the Oeppen-Vaupel extension starts at the life expectancy level of the average sexescombined in the More Developed Countries rather than that of females in Japan and consequentlyonly reaches 869 by mid-century instead of the 975 referred to earlier in the text

172 Journal of Economic Perspectives

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 2: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

slowly before 1800 because it was kept in equilibrium by Malthusian forces Didmortality begin to decline because of medical progress because of rising per capitaincome or for some other reason Did fertility begin to fall because of improvedcontraceptive technology and family planning programs or were couples optimiz-ing their fertility all along and reduced it in response to changing economicincentives Are we approaching a biological limit to life expectancy or can weexpect to see continuing or even accelerating longevity gains Some predictionssuggest that global fertility is projected to fall to 20 children per woman but inEurope it has been only 14 for some time and in east Asia it is 18 why should weexpect fertility decline to stop at 20 Low fertility and increasing longevity cause adramatic change in the population age distribution with a ten-fold increase in theratio of elderly to children Will the societal costs of the elderly be catastrophic Inthe past there has been great concern that rapid population growth in third-worldcountries would prevent economic development but most economists have down-played these fears Similarly environmentalists fear that world population is alreadyabove the carrying capacity of the biosphere while most economists are compla-cent about the projected 50 percent increase in population over this century In thispaper I will describe these demographic changes in greater detail and I will alsotouch on these questions and controversies

Before the Demographic Transition

According to a famous essay by Thomas Malthus rst published in 1798 slowpopulation growth was no accident Population was held in equilibrium with the

Table 1Global Population Trends Over the Transition Estimates Guesstimatesand Forecasts 1700ndash2100

Life Expectancy(Years at Birth)

Total Fertility Rate(Births per Woman)

Pop Size(Billions)

Pop Growth Rate(Year)

Pop 15( of Total Pop)

Pop 65( of Total Pop)

1700 27 60 68 050 36 41800 27 60 98 051 36 41900 30 52 165 056 35 41950 47 50 252 180 34 52000 65 27 607 122 30 72050 74 20 892 033 20 162100 81 20 946 004 18 21

Source Population numbers and growth rates for 1700 are taken from Biraben (1980) and for 1800 fromUnited Nations (1999) The gures for TFR and e(0) are best guesses by the author consistent with thepopulation growth rate based on Coale-Demeny (1983) Model South Female stable populations with anaverage age of childbearing of 31 and should not be treated as data The gures on age distribution arelikewise based on these model stable populations Data for 1900 are from Chamie (2001) for 1950ndash2050from United Nations (2003) and for 2100 from United Nations (2000)

168 Journal of Economic Perspectives

slowly growing economy Faster population growth would depress wages causingmortality to rise due to famine war or diseasemdashin short misery Malthus called thismortality response the ldquopositiverdquo check Depressed wages would also cause post-ponement of marriage resulting in prostitution and other vices including contra-ception this he called the ldquopreventiverdquo check Since population could potentiallygrow more rapidly than the economy it was always held in check by misery and vicewhich were therefore the inevitable human lot Economic progress could help onlytemporarily since population could soon grow to its new equilibrium level wheremisery and vice would again hold it in check Only through moral restraintmdashthatis the chaste postponement of marriagemdashdid Malthus believe that humanity mightavoid this fate and he thought this an unlikely outcome

For preindustrial Europe at least Malthus seems to have been right Popula-tion was held weakly in equilibrium by the positive and preventive checks Whenweather disease or political disturbance knocked population out of equilibriumreal wages and rents reacted strongly (Lee 1987 1997 Lee and Anderson 2002)and the checks brought population slowly back to equilibrium

In western Europe in the centuries before 1800 marriage required the re-sources to establish and maintain a separate household so age at rst marriage forwomen was late averaging around 25 years and a substantial share of women nevermarried (Flinn 1981 p 84 Livi-Bacci 2000 pp 99 ndash107) Although fertility washigh within marriage the total fertility rate (TFR) was moderate overall at four to ve births per woman (Livi-Bacci 2000 p 136) Mortality was also moderately highwith life expectancy at birth between 25 and 35 years (Flinn 1981 pp 92ndash101Livi-Bacci 2000 pp 61ndash90)2 but this was heavily in uenced by high mortality ininfancy and childhood Population growth rates were generally low averaging03 percentyear before 1700 in western Europe but sometimes rising above1 percent in the nineteenth century3 In Canada and the United States marriagewas much earlier because land was abundant and population at rst grew rapidlybut then decelerated in the nineteenth century

Outside of Europe and its offshoots fertility and mortality were higher in thepretransitional period and change in fertility and mortality came later Data onmortality or fertility are only occasionally available for third-world countries beforeWorld War II (Preston 1980) In India in the late nineteenth century life expec-tancy averaged in the low 20s and was highly variable while fertility was six or seven

2 The Total Fertility Rate is the sum across all ages of the birth rates at each age and therefore measuresthe total number of births a surviving woman would have over her reproductive life either actually fora generation of women or hypothetically for a given calendar year which is the more common usageLife expectancy at birth is the average age at death for an actual generation or hypothetically the averageage at death implied by the age-speci c death rates in a given calendar year which is the more commonusage3 A population with a Total Fertility Rate of 45 and life expectancy at birth of 30 grows at 05 percentper year (based on Coale-Demeny 1983 stable population models with a mean age of childbearing of31)

Ronald Lee 169

births per woman (Bhat 1989) In Taiwan the picture was similar around 1900Widespread data on fertility for the decades after World War II con rm that totalfertility rates in the third world were typically six or higher However recent worksuggests that the demographic situation in China may have been closer to theEuropean experience than previously thought (Lee and Feng 1999)

Although pretransitional fertility was typically high in third-world countries itslevels were far below the hypothetical biological upper limit for a population (asopposed to an individual) which is around 15 to 17 births per woman (Bongaarts1978) The contraceptive effects of prolonged breastfeeding often combined withtaboos on sex while breastfeeding led to long birth intervals and reduced fertilityAbortion was also important and sometimes the practice of coitus interruptus hadan important effect In some settings marriage patterns also limited fertilityalthough not as strongly as in western Europe

At the aggregate level population growth throughout the regions of the worldwas slow over the past millennium but there was a puzzling similarity in long swingsabout the growth path such as stagnation in the fourteenth and seventeenthcenturies and more rapid growth in the fteenth and eighteenth centuries Whileexchanges of disease through exploration and trade may have played some roleglobal climatic change was probably the main driving force (Galloway 1986)

Mortality Declines Fertility Declines and Population Growth

The classic demographic transition starts with mortality decline followed aftera time by reduced fertility4 leading to an interval of rst increased and thendecreased population growth and nally population aging I will consider thesemajor stages in turn

Mortality DeclinesThe beginning of the worldrsquos demographic transition occurred in northwest

Europe where mortality began a secular decline around 1800 In many low-incomecountries of the world the decline in mortality began in the early twentieth centuryand then accelerated dramatically after World War II

The rst stage of mortality decline is due to reductions in contagious andinfectious diseases that are spread by air or water Starting with the development ofthe smallpox vaccine in the late eighteenth century preventive medicine played arole in mortality decline in Europe However public health measures played animportant role from the late nineteenth century and some quarantine measuresmay have been effective in earlier centuries Improved personal hygiene alsohelped as income rose and as the germ theory of disease became more widely

4 There are cases in which fertility declined rst notably the United States and France

170 Journal of Economic Perspectives

known and accepted Another major factor in the early phases of growing lifeexpectancy is improvements in nutrition Famine mortality was reduced by im-provements in storage and transportation that permitted integration of regionaland international food markets smoothing across local variations in agriculturaloutput Secular increases in incomes led to improved nutrition in childhood andthroughout life Better-nourished populations with stronger organ systems werebetter able to resist disease Life expectancy is still positively associated with heightin the industrial country populations plausibly re ecting childhood health condi-tions (Fogel 1994 Barker 1992)

The high-income countries of the world have largely attained the potentialmortality reductions due to reductions in infectious disease and increases innutrition In recent decades the continuing reduction in mortality is due toreductions in chronic and degenerative diseases notably heart disease and cancer(Riley 2001) In the later part of the century publicly organized and fundedbiomedical research has played an increasingly important part and the humangenome project and stem cell research promise future gains

Many low-income populations did not begin the mortality transition until sometime in the twentieth century However they then made gains in life expectancyquite rapidly by historical standards In India life expectancy rose from around24 years in 1920 to 62 years today a gain of 48 years per calendar year over 80 yearsIn China life expectancy rose from 41 in 1950ndash1955 to 70 in 1995ndash1999 a gain of65 years per year over 45 years Such rapid rates of increase in low-incomecountries will surely taper off as mortality levels approach those of the globalleaders

There is a range of views on where mortality is headed during the comingdecades On the optimistic side Oeppen and Vaupel (2002) offer a remarkablegraph that plots the highest national female life expectancy attained for eachcalendar year from 1840 to 2000 The points fall close to a straight line starting at45 years in Sweden and ending at 85 years in Japan with a slope of 24 years perdecade If we boldly extend the line forward in time it reaches 975 years bymid-century and 109 years by 2100

Less optimistic projections are based on extrapolation of trends in age-speci cdeath rates over the past 50 or 100 years This approach implies more modest gainsfor the high-income nations of the world with average life expectancy approaching90 years by the end of the twenty- rst century (Lee and Carter 1992 TuljapurkarLi and Boe 2000)

Oddly some of the most pessimistic estimates of the future improvement inlife expectancy come from of cial government projections For example actuariesfor the US Social Security Administration project life expectancy of 83 years for2080 (sexes combined) Their projections are in line with the views of researcherswho believe that it will become increasingly dif cult to achieve gains as we ap-proach biological limits to human longevity (Olshansky and Carnes 2001) How-ever past projections by of cial government agencies of longevity gains have been

The Demographic Transition Three Centuries of Fundamental Change 171

systematically too low relative to actual outcomes (Keilman 1997 National Re-search Council 2000) Indeed old-age mortality has been declining at an acceler-ating rate in recent decades (Kannisto Lauritsen Thatcher and Vaupel 1994) Itis at the younger ages that declines have been slower

For a closer look at mortality trends it is convenient to use the United Nationsclassi cation of countries according to their recent economic development status asMore Developed Countries Less Developed Countries and Least Developed Coun-tries The More Developed Countries with 12 billion people include all of Europeplus North America Japan Australia and New Zealand The Least DevelopedCountries with 07 billion include most of sub-Saharan Africa plus BangladeshCambodia and a few other countries All other countries are Less Developedincluding India China and the bulk of the worldrsquos populationmdash 42 billion people5

One can question the relevance of using membership based on recent experienceto categorize groups of countries in earlier periods or far in the future but on netthis division seems useful

Figure 1 plots global trends in life expectancy since 1950 and UN projectionsto 2050 For the Least Developed Countries life expectancy rises from 357 years in1950ndash1954 to 487 years in 1995ndash1999 or 29 years per year For the Less DevelopedCountries the increase has been from 418 to 654 years or 52 years per year a veryrapid increase indeed For the More Developed Countries the increase has beenfrom 661 to 748 or 19 years per year6

While the overall increase in life expectancy is marked two recent counter-vailing trends deserve mention Figure 1 shows a stagnation in mortality gains forthe Least Developed Countries in the 1990s re ecting increasing mortality fromHIVAIDS in sub-Saharan Africa In the past 20 years more than 60 million peoplehave been infected by HIVAIDS worldwide of whom 40 million are still alive Ofthese cases only 6 percent are in More Developed Countries while in sub-SaharanAfrica HIVAIDS has become the leading cause of death The United Nationsprojects that in some African countries more than two-thirds of children aged15 years in 2000 will become infected with HIVAIDS before they reach 50 years ofage (United Nations 2002) For the 35 countries in Africa most affected lifeexpectancy at birth has been reduced on average by 65 years in the late 1990s aneffect that is projected to rise to 90 years in 2000ndash2005

The other main exception to the generally favorable recent trends in mortalityis found in countries of eastern Europe and former territories in the Soviet Unionwhich have experienced stagnating or declining life expectancy over the past two orthree decades predating the dif culties of the transition to market economies

5 In UN terminology the Less Developed Countries include the Least Developed Countries as a subsetunless otherwise indicated In this paper however these categories are mutually exclusive6 In this gure the Oeppen-Vaupel extension starts at the life expectancy level of the average sexescombined in the More Developed Countries rather than that of females in Japan and consequentlyonly reaches 869 by mid-century instead of the 975 referred to earlier in the text

172 Journal of Economic Perspectives

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 3: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

slowly growing economy Faster population growth would depress wages causingmortality to rise due to famine war or diseasemdashin short misery Malthus called thismortality response the ldquopositiverdquo check Depressed wages would also cause post-ponement of marriage resulting in prostitution and other vices including contra-ception this he called the ldquopreventiverdquo check Since population could potentiallygrow more rapidly than the economy it was always held in check by misery and vicewhich were therefore the inevitable human lot Economic progress could help onlytemporarily since population could soon grow to its new equilibrium level wheremisery and vice would again hold it in check Only through moral restraintmdashthatis the chaste postponement of marriagemdashdid Malthus believe that humanity mightavoid this fate and he thought this an unlikely outcome

For preindustrial Europe at least Malthus seems to have been right Popula-tion was held weakly in equilibrium by the positive and preventive checks Whenweather disease or political disturbance knocked population out of equilibriumreal wages and rents reacted strongly (Lee 1987 1997 Lee and Anderson 2002)and the checks brought population slowly back to equilibrium

In western Europe in the centuries before 1800 marriage required the re-sources to establish and maintain a separate household so age at rst marriage forwomen was late averaging around 25 years and a substantial share of women nevermarried (Flinn 1981 p 84 Livi-Bacci 2000 pp 99 ndash107) Although fertility washigh within marriage the total fertility rate (TFR) was moderate overall at four to ve births per woman (Livi-Bacci 2000 p 136) Mortality was also moderately highwith life expectancy at birth between 25 and 35 years (Flinn 1981 pp 92ndash101Livi-Bacci 2000 pp 61ndash90)2 but this was heavily in uenced by high mortality ininfancy and childhood Population growth rates were generally low averaging03 percentyear before 1700 in western Europe but sometimes rising above1 percent in the nineteenth century3 In Canada and the United States marriagewas much earlier because land was abundant and population at rst grew rapidlybut then decelerated in the nineteenth century

Outside of Europe and its offshoots fertility and mortality were higher in thepretransitional period and change in fertility and mortality came later Data onmortality or fertility are only occasionally available for third-world countries beforeWorld War II (Preston 1980) In India in the late nineteenth century life expec-tancy averaged in the low 20s and was highly variable while fertility was six or seven

2 The Total Fertility Rate is the sum across all ages of the birth rates at each age and therefore measuresthe total number of births a surviving woman would have over her reproductive life either actually fora generation of women or hypothetically for a given calendar year which is the more common usageLife expectancy at birth is the average age at death for an actual generation or hypothetically the averageage at death implied by the age-speci c death rates in a given calendar year which is the more commonusage3 A population with a Total Fertility Rate of 45 and life expectancy at birth of 30 grows at 05 percentper year (based on Coale-Demeny 1983 stable population models with a mean age of childbearing of31)

Ronald Lee 169

births per woman (Bhat 1989) In Taiwan the picture was similar around 1900Widespread data on fertility for the decades after World War II con rm that totalfertility rates in the third world were typically six or higher However recent worksuggests that the demographic situation in China may have been closer to theEuropean experience than previously thought (Lee and Feng 1999)

Although pretransitional fertility was typically high in third-world countries itslevels were far below the hypothetical biological upper limit for a population (asopposed to an individual) which is around 15 to 17 births per woman (Bongaarts1978) The contraceptive effects of prolonged breastfeeding often combined withtaboos on sex while breastfeeding led to long birth intervals and reduced fertilityAbortion was also important and sometimes the practice of coitus interruptus hadan important effect In some settings marriage patterns also limited fertilityalthough not as strongly as in western Europe

At the aggregate level population growth throughout the regions of the worldwas slow over the past millennium but there was a puzzling similarity in long swingsabout the growth path such as stagnation in the fourteenth and seventeenthcenturies and more rapid growth in the fteenth and eighteenth centuries Whileexchanges of disease through exploration and trade may have played some roleglobal climatic change was probably the main driving force (Galloway 1986)

Mortality Declines Fertility Declines and Population Growth

The classic demographic transition starts with mortality decline followed aftera time by reduced fertility4 leading to an interval of rst increased and thendecreased population growth and nally population aging I will consider thesemajor stages in turn

Mortality DeclinesThe beginning of the worldrsquos demographic transition occurred in northwest

Europe where mortality began a secular decline around 1800 In many low-incomecountries of the world the decline in mortality began in the early twentieth centuryand then accelerated dramatically after World War II

The rst stage of mortality decline is due to reductions in contagious andinfectious diseases that are spread by air or water Starting with the development ofthe smallpox vaccine in the late eighteenth century preventive medicine played arole in mortality decline in Europe However public health measures played animportant role from the late nineteenth century and some quarantine measuresmay have been effective in earlier centuries Improved personal hygiene alsohelped as income rose and as the germ theory of disease became more widely

4 There are cases in which fertility declined rst notably the United States and France

170 Journal of Economic Perspectives

known and accepted Another major factor in the early phases of growing lifeexpectancy is improvements in nutrition Famine mortality was reduced by im-provements in storage and transportation that permitted integration of regionaland international food markets smoothing across local variations in agriculturaloutput Secular increases in incomes led to improved nutrition in childhood andthroughout life Better-nourished populations with stronger organ systems werebetter able to resist disease Life expectancy is still positively associated with heightin the industrial country populations plausibly re ecting childhood health condi-tions (Fogel 1994 Barker 1992)

The high-income countries of the world have largely attained the potentialmortality reductions due to reductions in infectious disease and increases innutrition In recent decades the continuing reduction in mortality is due toreductions in chronic and degenerative diseases notably heart disease and cancer(Riley 2001) In the later part of the century publicly organized and fundedbiomedical research has played an increasingly important part and the humangenome project and stem cell research promise future gains

Many low-income populations did not begin the mortality transition until sometime in the twentieth century However they then made gains in life expectancyquite rapidly by historical standards In India life expectancy rose from around24 years in 1920 to 62 years today a gain of 48 years per calendar year over 80 yearsIn China life expectancy rose from 41 in 1950ndash1955 to 70 in 1995ndash1999 a gain of65 years per year over 45 years Such rapid rates of increase in low-incomecountries will surely taper off as mortality levels approach those of the globalleaders

There is a range of views on where mortality is headed during the comingdecades On the optimistic side Oeppen and Vaupel (2002) offer a remarkablegraph that plots the highest national female life expectancy attained for eachcalendar year from 1840 to 2000 The points fall close to a straight line starting at45 years in Sweden and ending at 85 years in Japan with a slope of 24 years perdecade If we boldly extend the line forward in time it reaches 975 years bymid-century and 109 years by 2100

Less optimistic projections are based on extrapolation of trends in age-speci cdeath rates over the past 50 or 100 years This approach implies more modest gainsfor the high-income nations of the world with average life expectancy approaching90 years by the end of the twenty- rst century (Lee and Carter 1992 TuljapurkarLi and Boe 2000)

Oddly some of the most pessimistic estimates of the future improvement inlife expectancy come from of cial government projections For example actuariesfor the US Social Security Administration project life expectancy of 83 years for2080 (sexes combined) Their projections are in line with the views of researcherswho believe that it will become increasingly dif cult to achieve gains as we ap-proach biological limits to human longevity (Olshansky and Carnes 2001) How-ever past projections by of cial government agencies of longevity gains have been

The Demographic Transition Three Centuries of Fundamental Change 171

systematically too low relative to actual outcomes (Keilman 1997 National Re-search Council 2000) Indeed old-age mortality has been declining at an acceler-ating rate in recent decades (Kannisto Lauritsen Thatcher and Vaupel 1994) Itis at the younger ages that declines have been slower

For a closer look at mortality trends it is convenient to use the United Nationsclassi cation of countries according to their recent economic development status asMore Developed Countries Less Developed Countries and Least Developed Coun-tries The More Developed Countries with 12 billion people include all of Europeplus North America Japan Australia and New Zealand The Least DevelopedCountries with 07 billion include most of sub-Saharan Africa plus BangladeshCambodia and a few other countries All other countries are Less Developedincluding India China and the bulk of the worldrsquos populationmdash 42 billion people5

One can question the relevance of using membership based on recent experienceto categorize groups of countries in earlier periods or far in the future but on netthis division seems useful

Figure 1 plots global trends in life expectancy since 1950 and UN projectionsto 2050 For the Least Developed Countries life expectancy rises from 357 years in1950ndash1954 to 487 years in 1995ndash1999 or 29 years per year For the Less DevelopedCountries the increase has been from 418 to 654 years or 52 years per year a veryrapid increase indeed For the More Developed Countries the increase has beenfrom 661 to 748 or 19 years per year6

While the overall increase in life expectancy is marked two recent counter-vailing trends deserve mention Figure 1 shows a stagnation in mortality gains forthe Least Developed Countries in the 1990s re ecting increasing mortality fromHIVAIDS in sub-Saharan Africa In the past 20 years more than 60 million peoplehave been infected by HIVAIDS worldwide of whom 40 million are still alive Ofthese cases only 6 percent are in More Developed Countries while in sub-SaharanAfrica HIVAIDS has become the leading cause of death The United Nationsprojects that in some African countries more than two-thirds of children aged15 years in 2000 will become infected with HIVAIDS before they reach 50 years ofage (United Nations 2002) For the 35 countries in Africa most affected lifeexpectancy at birth has been reduced on average by 65 years in the late 1990s aneffect that is projected to rise to 90 years in 2000ndash2005

The other main exception to the generally favorable recent trends in mortalityis found in countries of eastern Europe and former territories in the Soviet Unionwhich have experienced stagnating or declining life expectancy over the past two orthree decades predating the dif culties of the transition to market economies

5 In UN terminology the Less Developed Countries include the Least Developed Countries as a subsetunless otherwise indicated In this paper however these categories are mutually exclusive6 In this gure the Oeppen-Vaupel extension starts at the life expectancy level of the average sexescombined in the More Developed Countries rather than that of females in Japan and consequentlyonly reaches 869 by mid-century instead of the 975 referred to earlier in the text

172 Journal of Economic Perspectives

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 4: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

births per woman (Bhat 1989) In Taiwan the picture was similar around 1900Widespread data on fertility for the decades after World War II con rm that totalfertility rates in the third world were typically six or higher However recent worksuggests that the demographic situation in China may have been closer to theEuropean experience than previously thought (Lee and Feng 1999)

Although pretransitional fertility was typically high in third-world countries itslevels were far below the hypothetical biological upper limit for a population (asopposed to an individual) which is around 15 to 17 births per woman (Bongaarts1978) The contraceptive effects of prolonged breastfeeding often combined withtaboos on sex while breastfeeding led to long birth intervals and reduced fertilityAbortion was also important and sometimes the practice of coitus interruptus hadan important effect In some settings marriage patterns also limited fertilityalthough not as strongly as in western Europe

At the aggregate level population growth throughout the regions of the worldwas slow over the past millennium but there was a puzzling similarity in long swingsabout the growth path such as stagnation in the fourteenth and seventeenthcenturies and more rapid growth in the fteenth and eighteenth centuries Whileexchanges of disease through exploration and trade may have played some roleglobal climatic change was probably the main driving force (Galloway 1986)

Mortality Declines Fertility Declines and Population Growth

The classic demographic transition starts with mortality decline followed aftera time by reduced fertility4 leading to an interval of rst increased and thendecreased population growth and nally population aging I will consider thesemajor stages in turn

Mortality DeclinesThe beginning of the worldrsquos demographic transition occurred in northwest

Europe where mortality began a secular decline around 1800 In many low-incomecountries of the world the decline in mortality began in the early twentieth centuryand then accelerated dramatically after World War II

The rst stage of mortality decline is due to reductions in contagious andinfectious diseases that are spread by air or water Starting with the development ofthe smallpox vaccine in the late eighteenth century preventive medicine played arole in mortality decline in Europe However public health measures played animportant role from the late nineteenth century and some quarantine measuresmay have been effective in earlier centuries Improved personal hygiene alsohelped as income rose and as the germ theory of disease became more widely

4 There are cases in which fertility declined rst notably the United States and France

170 Journal of Economic Perspectives

known and accepted Another major factor in the early phases of growing lifeexpectancy is improvements in nutrition Famine mortality was reduced by im-provements in storage and transportation that permitted integration of regionaland international food markets smoothing across local variations in agriculturaloutput Secular increases in incomes led to improved nutrition in childhood andthroughout life Better-nourished populations with stronger organ systems werebetter able to resist disease Life expectancy is still positively associated with heightin the industrial country populations plausibly re ecting childhood health condi-tions (Fogel 1994 Barker 1992)

The high-income countries of the world have largely attained the potentialmortality reductions due to reductions in infectious disease and increases innutrition In recent decades the continuing reduction in mortality is due toreductions in chronic and degenerative diseases notably heart disease and cancer(Riley 2001) In the later part of the century publicly organized and fundedbiomedical research has played an increasingly important part and the humangenome project and stem cell research promise future gains

Many low-income populations did not begin the mortality transition until sometime in the twentieth century However they then made gains in life expectancyquite rapidly by historical standards In India life expectancy rose from around24 years in 1920 to 62 years today a gain of 48 years per calendar year over 80 yearsIn China life expectancy rose from 41 in 1950ndash1955 to 70 in 1995ndash1999 a gain of65 years per year over 45 years Such rapid rates of increase in low-incomecountries will surely taper off as mortality levels approach those of the globalleaders

There is a range of views on where mortality is headed during the comingdecades On the optimistic side Oeppen and Vaupel (2002) offer a remarkablegraph that plots the highest national female life expectancy attained for eachcalendar year from 1840 to 2000 The points fall close to a straight line starting at45 years in Sweden and ending at 85 years in Japan with a slope of 24 years perdecade If we boldly extend the line forward in time it reaches 975 years bymid-century and 109 years by 2100

Less optimistic projections are based on extrapolation of trends in age-speci cdeath rates over the past 50 or 100 years This approach implies more modest gainsfor the high-income nations of the world with average life expectancy approaching90 years by the end of the twenty- rst century (Lee and Carter 1992 TuljapurkarLi and Boe 2000)

Oddly some of the most pessimistic estimates of the future improvement inlife expectancy come from of cial government projections For example actuariesfor the US Social Security Administration project life expectancy of 83 years for2080 (sexes combined) Their projections are in line with the views of researcherswho believe that it will become increasingly dif cult to achieve gains as we ap-proach biological limits to human longevity (Olshansky and Carnes 2001) How-ever past projections by of cial government agencies of longevity gains have been

The Demographic Transition Three Centuries of Fundamental Change 171

systematically too low relative to actual outcomes (Keilman 1997 National Re-search Council 2000) Indeed old-age mortality has been declining at an acceler-ating rate in recent decades (Kannisto Lauritsen Thatcher and Vaupel 1994) Itis at the younger ages that declines have been slower

For a closer look at mortality trends it is convenient to use the United Nationsclassi cation of countries according to their recent economic development status asMore Developed Countries Less Developed Countries and Least Developed Coun-tries The More Developed Countries with 12 billion people include all of Europeplus North America Japan Australia and New Zealand The Least DevelopedCountries with 07 billion include most of sub-Saharan Africa plus BangladeshCambodia and a few other countries All other countries are Less Developedincluding India China and the bulk of the worldrsquos populationmdash 42 billion people5

One can question the relevance of using membership based on recent experienceto categorize groups of countries in earlier periods or far in the future but on netthis division seems useful

Figure 1 plots global trends in life expectancy since 1950 and UN projectionsto 2050 For the Least Developed Countries life expectancy rises from 357 years in1950ndash1954 to 487 years in 1995ndash1999 or 29 years per year For the Less DevelopedCountries the increase has been from 418 to 654 years or 52 years per year a veryrapid increase indeed For the More Developed Countries the increase has beenfrom 661 to 748 or 19 years per year6

While the overall increase in life expectancy is marked two recent counter-vailing trends deserve mention Figure 1 shows a stagnation in mortality gains forthe Least Developed Countries in the 1990s re ecting increasing mortality fromHIVAIDS in sub-Saharan Africa In the past 20 years more than 60 million peoplehave been infected by HIVAIDS worldwide of whom 40 million are still alive Ofthese cases only 6 percent are in More Developed Countries while in sub-SaharanAfrica HIVAIDS has become the leading cause of death The United Nationsprojects that in some African countries more than two-thirds of children aged15 years in 2000 will become infected with HIVAIDS before they reach 50 years ofage (United Nations 2002) For the 35 countries in Africa most affected lifeexpectancy at birth has been reduced on average by 65 years in the late 1990s aneffect that is projected to rise to 90 years in 2000ndash2005

The other main exception to the generally favorable recent trends in mortalityis found in countries of eastern Europe and former territories in the Soviet Unionwhich have experienced stagnating or declining life expectancy over the past two orthree decades predating the dif culties of the transition to market economies

5 In UN terminology the Less Developed Countries include the Least Developed Countries as a subsetunless otherwise indicated In this paper however these categories are mutually exclusive6 In this gure the Oeppen-Vaupel extension starts at the life expectancy level of the average sexescombined in the More Developed Countries rather than that of females in Japan and consequentlyonly reaches 869 by mid-century instead of the 975 referred to earlier in the text

172 Journal of Economic Perspectives

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 5: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

known and accepted Another major factor in the early phases of growing lifeexpectancy is improvements in nutrition Famine mortality was reduced by im-provements in storage and transportation that permitted integration of regionaland international food markets smoothing across local variations in agriculturaloutput Secular increases in incomes led to improved nutrition in childhood andthroughout life Better-nourished populations with stronger organ systems werebetter able to resist disease Life expectancy is still positively associated with heightin the industrial country populations plausibly re ecting childhood health condi-tions (Fogel 1994 Barker 1992)

The high-income countries of the world have largely attained the potentialmortality reductions due to reductions in infectious disease and increases innutrition In recent decades the continuing reduction in mortality is due toreductions in chronic and degenerative diseases notably heart disease and cancer(Riley 2001) In the later part of the century publicly organized and fundedbiomedical research has played an increasingly important part and the humangenome project and stem cell research promise future gains

Many low-income populations did not begin the mortality transition until sometime in the twentieth century However they then made gains in life expectancyquite rapidly by historical standards In India life expectancy rose from around24 years in 1920 to 62 years today a gain of 48 years per calendar year over 80 yearsIn China life expectancy rose from 41 in 1950ndash1955 to 70 in 1995ndash1999 a gain of65 years per year over 45 years Such rapid rates of increase in low-incomecountries will surely taper off as mortality levels approach those of the globalleaders

There is a range of views on where mortality is headed during the comingdecades On the optimistic side Oeppen and Vaupel (2002) offer a remarkablegraph that plots the highest national female life expectancy attained for eachcalendar year from 1840 to 2000 The points fall close to a straight line starting at45 years in Sweden and ending at 85 years in Japan with a slope of 24 years perdecade If we boldly extend the line forward in time it reaches 975 years bymid-century and 109 years by 2100

Less optimistic projections are based on extrapolation of trends in age-speci cdeath rates over the past 50 or 100 years This approach implies more modest gainsfor the high-income nations of the world with average life expectancy approaching90 years by the end of the twenty- rst century (Lee and Carter 1992 TuljapurkarLi and Boe 2000)

Oddly some of the most pessimistic estimates of the future improvement inlife expectancy come from of cial government projections For example actuariesfor the US Social Security Administration project life expectancy of 83 years for2080 (sexes combined) Their projections are in line with the views of researcherswho believe that it will become increasingly dif cult to achieve gains as we ap-proach biological limits to human longevity (Olshansky and Carnes 2001) How-ever past projections by of cial government agencies of longevity gains have been

The Demographic Transition Three Centuries of Fundamental Change 171

systematically too low relative to actual outcomes (Keilman 1997 National Re-search Council 2000) Indeed old-age mortality has been declining at an acceler-ating rate in recent decades (Kannisto Lauritsen Thatcher and Vaupel 1994) Itis at the younger ages that declines have been slower

For a closer look at mortality trends it is convenient to use the United Nationsclassi cation of countries according to their recent economic development status asMore Developed Countries Less Developed Countries and Least Developed Coun-tries The More Developed Countries with 12 billion people include all of Europeplus North America Japan Australia and New Zealand The Least DevelopedCountries with 07 billion include most of sub-Saharan Africa plus BangladeshCambodia and a few other countries All other countries are Less Developedincluding India China and the bulk of the worldrsquos populationmdash 42 billion people5

One can question the relevance of using membership based on recent experienceto categorize groups of countries in earlier periods or far in the future but on netthis division seems useful

Figure 1 plots global trends in life expectancy since 1950 and UN projectionsto 2050 For the Least Developed Countries life expectancy rises from 357 years in1950ndash1954 to 487 years in 1995ndash1999 or 29 years per year For the Less DevelopedCountries the increase has been from 418 to 654 years or 52 years per year a veryrapid increase indeed For the More Developed Countries the increase has beenfrom 661 to 748 or 19 years per year6

While the overall increase in life expectancy is marked two recent counter-vailing trends deserve mention Figure 1 shows a stagnation in mortality gains forthe Least Developed Countries in the 1990s re ecting increasing mortality fromHIVAIDS in sub-Saharan Africa In the past 20 years more than 60 million peoplehave been infected by HIVAIDS worldwide of whom 40 million are still alive Ofthese cases only 6 percent are in More Developed Countries while in sub-SaharanAfrica HIVAIDS has become the leading cause of death The United Nationsprojects that in some African countries more than two-thirds of children aged15 years in 2000 will become infected with HIVAIDS before they reach 50 years ofage (United Nations 2002) For the 35 countries in Africa most affected lifeexpectancy at birth has been reduced on average by 65 years in the late 1990s aneffect that is projected to rise to 90 years in 2000ndash2005

The other main exception to the generally favorable recent trends in mortalityis found in countries of eastern Europe and former territories in the Soviet Unionwhich have experienced stagnating or declining life expectancy over the past two orthree decades predating the dif culties of the transition to market economies

5 In UN terminology the Less Developed Countries include the Least Developed Countries as a subsetunless otherwise indicated In this paper however these categories are mutually exclusive6 In this gure the Oeppen-Vaupel extension starts at the life expectancy level of the average sexescombined in the More Developed Countries rather than that of females in Japan and consequentlyonly reaches 869 by mid-century instead of the 975 referred to earlier in the text

172 Journal of Economic Perspectives

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 6: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

systematically too low relative to actual outcomes (Keilman 1997 National Re-search Council 2000) Indeed old-age mortality has been declining at an acceler-ating rate in recent decades (Kannisto Lauritsen Thatcher and Vaupel 1994) Itis at the younger ages that declines have been slower

For a closer look at mortality trends it is convenient to use the United Nationsclassi cation of countries according to their recent economic development status asMore Developed Countries Less Developed Countries and Least Developed Coun-tries The More Developed Countries with 12 billion people include all of Europeplus North America Japan Australia and New Zealand The Least DevelopedCountries with 07 billion include most of sub-Saharan Africa plus BangladeshCambodia and a few other countries All other countries are Less Developedincluding India China and the bulk of the worldrsquos populationmdash 42 billion people5

One can question the relevance of using membership based on recent experienceto categorize groups of countries in earlier periods or far in the future but on netthis division seems useful

Figure 1 plots global trends in life expectancy since 1950 and UN projectionsto 2050 For the Least Developed Countries life expectancy rises from 357 years in1950ndash1954 to 487 years in 1995ndash1999 or 29 years per year For the Less DevelopedCountries the increase has been from 418 to 654 years or 52 years per year a veryrapid increase indeed For the More Developed Countries the increase has beenfrom 661 to 748 or 19 years per year6

While the overall increase in life expectancy is marked two recent counter-vailing trends deserve mention Figure 1 shows a stagnation in mortality gains forthe Least Developed Countries in the 1990s re ecting increasing mortality fromHIVAIDS in sub-Saharan Africa In the past 20 years more than 60 million peoplehave been infected by HIVAIDS worldwide of whom 40 million are still alive Ofthese cases only 6 percent are in More Developed Countries while in sub-SaharanAfrica HIVAIDS has become the leading cause of death The United Nationsprojects that in some African countries more than two-thirds of children aged15 years in 2000 will become infected with HIVAIDS before they reach 50 years ofage (United Nations 2002) For the 35 countries in Africa most affected lifeexpectancy at birth has been reduced on average by 65 years in the late 1990s aneffect that is projected to rise to 90 years in 2000ndash2005

The other main exception to the generally favorable recent trends in mortalityis found in countries of eastern Europe and former territories in the Soviet Unionwhich have experienced stagnating or declining life expectancy over the past two orthree decades predating the dif culties of the transition to market economies

5 In UN terminology the Less Developed Countries include the Least Developed Countries as a subsetunless otherwise indicated In this paper however these categories are mutually exclusive6 In this gure the Oeppen-Vaupel extension starts at the life expectancy level of the average sexescombined in the More Developed Countries rather than that of females in Japan and consequentlyonly reaches 869 by mid-century instead of the 975 referred to earlier in the text

172 Journal of Economic Perspectives

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 7: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

Male life expectancy in the Russian Federation is now 60 years equal to its level inthe early 1950s (United Nations 2002) and similar to that of India Russian womenhave done somewhat better

As longevity has increased the female advantage in life expectancy has alsorisen In the More Developed Countries the sex gap in life expectancy hasincreased from 50 years in the early 1950s to 74 years today In the Less DevelopedCountries it has grown from 17 years to 36 years today In the More DevelopedCountries these trends are partly explained by the later date at which women tookup smoking and we can expect some reversal of the growing gap as is nowhappening in the United States where smoking-related deaths of women wererising rapidly from 1975 to 1995 while they fell rapidly for men (Pampel 2002pp 98 ndash99) The sex difference in life expectancy causes an increasing ratio ofwomen to men at older ages and combined with a younger female age at marriagecauses a disproportionate number of widows Worldwide there are 76 percentmore women than men at ages 80 to 89 and there are ve times as many womenas men over 100 (United Nations 2002 p 196)

Fertility TransitionBetween 1890 and 1920 marital fertility began to decline in most European

provinces with a median decline of about 40 percent from 1870 to 1930 (Coale andTreadway 1986 p 44) The preceding decline in mortality may have been partlyresponsible although it cannot explain the timing

Figure 1Past and Projected Life Expectancy at Birth by Major Development Groups1950ndash2050

1950 1960

More Developed

Less Developed

Oeppen-Vaupel

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205030

40

50

60

70

80

90

Ave

rage

Yea

rs L

ived

Sources Historical and Middle Series forecasts are taken from United Nations (2003) Record lifeexpectancy trend is taken from Oeppen and Vaupel (2002)

Ronald Lee 173

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 8: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

Most economic theories of fertility start with the idea that couples wish to havea certain number of surviving children rather than births per se If this assumptionholds then once potential parents recognize an exogenous increase in childsurvival fertility should decline However mortality and fertility interact in com-plicated ways For example increased survival raises the return on postbirth invest-ments in children (Meltzer 1992) Some of the improvement in child survival isitself a response to parental decisions to invest more in the health and welfare of asmaller number of children (Nerlove 1974) These issues of parental investment inchildren suggest that fertility will also be in uenced by how economic changein uences the costs and bene ts of childbearing

Bearing and rearing children is time intensive Technological progress andincreasing physical and human capital make labor more productive raising thevalue of time in all activities which makes children increasingly costly relative toconsumption goods Since women have had primary responsibility for childbearingand rearing variations in the productivity of women have been particularly impor-tant For example physical capital may substitute for human strength reducing oreliminating the productivity differential between male and female labor and thusraising the opportunity cost of children (Galor and Weil 1996) Rising incomeshave shifted consumption demand toward nonagricultural goods and services forwhich educated labor is a more important input A rise in the return to educationthen leads to increased investments in education Overall these patterns haveseveral effects children become more expensive their economic contributions arediminished by school time and educated parents have higher value of time whichraises the opportunity costs of childrearing Furthermore parents with higherincomes choose to devote more resources to each child and since this raises thecost of each child it also leads to fewer children (Becker 1981 Willis 1974 1994)

Beyond these tightly modeled theories of fertility more highly developedmarkets and governments can replace many of the important economic functionsof the traditional family and household like risk sharing and provision of retire-ment income further weakening the value of children

The importance of contraceptive technology for fertility decline is hotly de-bated with many economists viewing it as of relatively little importance TheEuropean fertility transition for example was achieved using coitus interruptus Thisdebate extends from the interpretation of the past to prescriptions for currentpolicy (Pritchett 1994 Gertler and Molyneaux 1994 Schultz 1994)

Figure 2 plots fertility for countries by development status since 1950 withUnited Nations projections to 2050 The transition in the More Developed Coun-tries occurred before this chart begins Thus for the More Developed Countriesthe chart re ects their baby booms and busts after World War II followed by whatis sometimes called the ldquosecond fertility transitionrdquo as fertility fell far below re-placement level in many industrial nations (Van de Kaa 1987) The Less DevelopedCountries began the fertility transition in the mid-1960s or somewhat later Fertilitytransitions since World War II have typically been more rapid than those for the

174 Journal of Economic Perspectives

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 9: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

current More Developed Countries with fertility reaching replacement in 20 to30 years after onset for those countries that have completed the transition Fertilitytransitions in east Asia have been particularly early and rapid while those in southAsia and Latin America have been much slower (Casterline 2001) In the 25 yearsbetween 1965 and 1990 their total fertility rate fell from six children per woman tothree The Least Developed Countries started from a slightly higher initial level offertility and started their fertility transition later By now it is clear that they toohave begun the transition and the question about their fertility transition is nolonger ldquowhetherrdquo but rather ldquohow farrdquo and ldquohow fastrdquo

Currently 60 countries with 43 percent of the worldrsquos population have fertilityat or below the replacement level of 21 children per woman Of these 43 are MoreDeveloped Countries but 17 are Less Developed Countries The total fertility ratehas fallen well below replacement for almost all the industrialized countries and formany countries of east Asia including Taiwan south Korea and China

When fertility declines it declines most at the youngest and oldest ages andbecomes concentrated in the 20s and early 30s Currently two-thirds of childbear-ing occurs between ages 20 and 35 in the Least Developed Countries whereas80 percent occurs in this age range in the More Developed Countries Birth ratesabove age 35 are only one-seventh as high in the More Developed Countries as inthe Least Developed Countries and only one- fth as high below age 20 Despite thisgeneral reduction in fertility at older ages age at rst marriage and rst birth aregenerally moving to older ages throughout the industrial and much of the devel-oping world The rising age of childbearing itself depresses the total fertility rate

Figure 2Past and Projected Total Fertility Rate by Major Development Groups 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 20500

2

1

3

4

5

6

7

Bir

ths

per

Wom

an

Source Historical and Middle Series forecasts are taken from United Nations (2003)

The Demographic Transition Three Centuries of Fundamental Change 175

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 10: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

which is a synthetic cohort measure below the underlying completed fertilities ofgenerations When the average age of childbearing stops rising as it must sooneror later the total fertility rate should increase to this underlying level In manycountries of Europe womenrsquos mean age at birth of the rst child has been risingby 01 to 04 years of age per calendar year in recent decades distorting the totalfertility rate downward by 10 to 40 percent relative to the eventual completedfertility of generations (Bongaarts 2001)

The UN fertility projections in Figure 2 show a continuing slow transition insub-Saharan Africa and the other Least Developed Countries while fertility declinefor the Less Developed Countries decelerates as it approaches replacement levelThe fertility of the More Developed Countries is projected to return towardreplacement levels These projections are plausible but fertility has proven verydif cult to forecast in the past Most of the theories of fertility as well as theexperience of the More Developed Countries imply that the demand for childrenwill continue to decline in the future But these theories point to no natural lowerbound for fertility Nor do they provide a mechanism for fertility to respond toeconomic signals in such a way that population would equilibrate as I have arguedit did in the preindustrial past In much of the world fertility has in fact fallen tolevels well below the 21 births per woman that would just replace one generationby the next and it is not yet clear whether it will fall farther rebound towardreplacement or stay at current levels

Population GrowthThe combination of fertility and mortality determines population growth as

shown in Figure 3 The horizontal axis of the gure shows life expectancy at birthThe vertical axis shows the total fertility rate The contours illustrate the steady-statepopulation growth rate corresponding to constant fertility and mortality at theindicated level where the dark contour represents zero population growth andmovement toward the upper right corner indicates increasingly rapid growth(Caveat Steady-state growth rates will differ from actual growth rates due toevolutions in the age distribution and to net migration) On this graph thedemographic transition will rst appear as a move to the right representing a gainin life expectancy with little change in fertility and a movement to a higherpopulation growth contour then as a diagonal downward movement toward theright re ecting the simultaneous decline in fertility and mortality recrossingcontours toward lower rates of growth

Between 1950 and 2050 the actual and projected trajectories for the MoreLess and Least Developed Countries are plotted To add more historical depth Ihave added two historical trajectories One is a trajectory for Europe from 1800 to1950 The end point of this trajectory in 1950 is quite close to the start point for themore developed countries I have also added the trajectory for India from 1896 to1970 illustrating the earlier stages of the demographic transition that are missingfor the Less and Least Developed Countries before 1950

176 Journal of Economic Perspectives

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 11: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

The starting points of these demographic paths differ somewhat India hadhigher initial fertility and mortality than Europe as did the Least DevelopedCountries relative to the Less Developed Countries in 1950 which in turn had farhigher mortality and fertility than the More Developed Countries in that yearExcept for India the starting points all indicate moderate (for Europe) to rapid(for Least and Less Developed Countries) population growth But in all cases theinitial path is horizontally to the rightmdashmost strikingly for Indiamdashindicating thatmortality decline preceded fertility decline causing accelerating population growth

Figure 3Life Expectancy and Total Fertility Rate with Population Growth Isoquants Pastand Projected Trajectories for More Less and Least Developed Countries

Sources Historical and Middle Series forecasts for Least Less and More Developed Countries aretaken from the United Nations (2003) Data for India are taken from Bhat (1989) for the period1891ndash1901 to 1941ndash1951 and from the United Nations (2003) for the period 1950ndash1970 Data forEurope are based on Tables 62ndash65 in Livi-Bacci (2000) for the period 1800ndash1900 and Mitchell(1975) for the period 1900ndash1950 For the period 1800ndash1900 European total fertility rate and e(0)are derived as a population-weighted average of country-speci c data Where unavailable these dataare estimated based on regression using the crude birth rate and death rates to predict total fertilityrate and e(0) respectively for other European countries in this period For the period 1900ndash1950 asingle series of crude birth rates and death rates for all Europe are assembled A regression based ondata from 1900 to 1950 is used to predict total fertility rate and e(0) based on the crude birth rateand death rate respectively The growth isoquants are derived from Coale and Demeny (1983) usingthe Model West Female life table when the mean age of childbearing is 29

Ronald Lee 177

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 12: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

approaching 3 percent for the Less and Least Developed Countries After fertilitybegins to decline the trajectories slope diagonally down toward the right recross-ing contours toward lower rates of population growth Europe brie y attains15 percent population growth but then fertility plunges a decline picked up after1950 by the group ending with population decline at 1 percent annually Howeverthe actual European population growth rate is very near zero slightly higher thanhypothetical steady-state growth rate due to changes in the age distribution and inimmigration All three groups are projected to approach the zero-growth contourby 2050 the More Developed Countries from below and the Less and LeastDeveloped Countries from above

There has been rapid global convergence in fertility and mortality amongnations over the past 50 years although important differences remain This con-vergence of fertility and mortality is in marked contrast to per capita GDP whichhas tended to diverge between high-income and low-income countries during thistime Today the median individual lives in a country with a total fertility rate of23mdash barely above the 21 fertility rate of the United Statesmdashand a median lifeexpectancy at birth of 68 years compared to 77 years for the United States (Wilson2001)

Actual trends in population growth rates can be seen over a longer time periodin Figure 4 Data before 1950 for the Less Developed Countries (which here

Figure 4Population Growth Rates 1750ndash2150

Source The population growth rates are calculated as instantaneous (exp(rt)) rates based onpopulation data The data for 1750ndash1950 are taken from Tables 1 and 2 of United Nations (1999)and for 1950ndash2150 are taken from United Nations (2000)

178 Journal of Economic Perspectives

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 13: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

include the Least Developed Countries) are particularly uncertain Populationgrowth rates in the More Developed Countries rose about a half percent abovethose in the Less Developed Countries in the century before 1950 But after WorldWar II population growth surged in the Less Developed Countries with the growthrate peaking at 25 percent in the mid-1960s then dropping rapidly The globalpopulation share of the More Developed Countries is projected to drop from itscurrent 20 percent to only 14 percent in 2050 Long-term UN projections suggestthat global population growth will be close to zero by about 2100

Global population projections are regularly prepared by the United Nationsand the US Census Bureau The method could be described as common senseinformed by careful measurement and inspection of trends and current levels anda distillation of historical patterns of decline for fertility and mortality7 The centralcurrent projections from the United Nations which are consistent with some otherglobal projections anticipate that global population will reach 89 billion by 2050and just below 95 billion by 2100mdasha 50 percent increase from its current size (seeFigure 5) The National Research Council (2000 p 213) based on a carefulanalysis of past forecasting errors by the United Nations concluded that there is a95 percent probability that the actual population in 2050 will fall between 82 and102 billion A comparable analysis cannot be done for the 2100 forecasts but the

7 The methods problems and performance of these projections as well as earlier ones by the WorldBank are described and analyzed in a recent report from the National Academy of Sciences (NationalResearch Council 2000)

Figure 5Population by Major Development Groups 1950ndash2050 with High and LowScenario Forecasts for Total World Population

Low Scenario

1950 1960 1970

More Developed

Less Developed

Least DevelopedHigh Scenario

1980 1990 2000 2010 2020 2030 2040 20500

2

1

4

3

6

5

9

8

7

10

11

Bill

ion

s of

Peo

ple

Source Historical and Middle Series forecasts are taken from United Nations (2003) as are High andLow scenarios

The Demographic Transition Three Centuries of Fundamental Change 179

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 14: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

United Nationsrsquo high-low range extends over a very wide interval from 52 to162 billion This great uncertainty must be kept in mind when considering all theprojections of fertility mortality and population size for the twenty- rst century

The population projection for the More Developed Countries population isnearly at with population decrease in Europe and Japan offset by populationincrease in the United States and other areas Most of the projected populationincrease takes place in the Less Developed Countries which gain 18 billion or43 percent However the greatest proportional gain comes in the Least DevelopedCountries with their higher fertility and more rapid growth These countries gain1 billion in population or 151 percent The relative shares of the three groups willchange a good deal over the next 50 years

Shifts in Age Distribution The Last Stage of the DemographicTransition

The patterns of change in fertility mortality and growth rates over the demo-graphic transition are widely known and understood Less well understood are thesystematic changes in age distribution that are an integral part of the demographictransition and that continue long after the other rates have stabilized

A Classic Example The Case of IndiaThe panels of Figure 6 display a classic demographic transition using India as

an example The starred points in the gures are actual data from India from 1896to 2000 The hollow points are based on the UN projections for Indiarsquos mortalityfertility and population up through 2050 The lines in Panels A and B are simpleanalytic functions t to the historic fertility and mortality data and the lines in theother panels are simulated based on these and the initial population8 In India thepretransitional total fertility rate is about six births per woman (Panel A) and lifeexpectancy is about 25 years (Panel B) Indiarsquos mortality decline leads its fertilitydecline by 50 years The fertility transition here is slow relative to East Asiarsquos butsimilar to Latin Americarsquos These trends interact to create a population growth ratethat rose from less than 05 percent per year in 1900 to more than 2 percent peryear by 1950 before starting to decline (Panel C) Indiarsquos total population quadru-pled in the twentieth century and is projected to increase by another 60 percent inthe twenty- rst century with the growth rate of the population leveling out to nearzero by 2100 (Panel D)

8 The total fertility rate is modeled as a quintic trajectory declining from 59 in 1953 to 21 in 2025Mortality is modeled using the Lee and Carter (1992) mortality index k which is t to a sinusoidal pathwith life expectancy going from 247 in 1900 to 800 in 2100 Many other curves could equally well havebeen used

180 Journal of Economic Perspectives

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 15: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

But the focus here is on shifts in the age distribution that result from thedemographic transition These shifts can be seen in the ldquodependency ratiosrdquo whichtake either the younger or the older population and divide by the working-agepopulation For example the child dependency ratio is the population aged 0 ndash14

Figure 6A Classic Demographic Transition Actual and Projected for India and Simulated1900ndash2100

Notes The simulation is based on a fertility transition in which the total fertility rate follows a quinticpath declining from 59 in 1953 to 21 in 2025 and a mortality transition in which the mortalityindex follows a sinusoidal path as e(0) increases from 247 in 1900 to 800 in 2100Sources Actual India data for the period 1891ndash1901 to 1941ndash1951 are taken from Bhat (1989) Actualand projected data are taken from United Nations (2003)

Ronald Lee 181

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 16: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

divided by the population aged 15ndash 649 The old-age dependency ratio is usuallyde ned as the number of those 65 and older divided by the population aged 15ndash 64The ldquooldest oldrdquo dependency ratio looks at those 85 years and older divided by theworking age population Finally the total dependency ratio takes the sum of thepopulation under 15 and over 65 and divides it by the population in the interme-diate range of 15ndash 64

In the rst phase of the transition when mortality begins to decline whilefertility remains high mortality declines most at the youngest ages causing anincrease in the proportion of children in the population and raising child depen-dency ratios as shown in Panel E Thus counter to intuition mortality declineinitially makes populations younger rather than older in a phase that can last manydecades and here lasts 70 years During this phase families nd themselves withincreasing numbers of surviving children Both families and governments maystruggle to achieve educational goals for the unexpectedly high number ofchildren

Next as fertility declines child dependency ratios decline and soon fall belowtheir pretransition levels The working-age population grows faster than the pop-ulation as a whole so the total dependency ratio declines This second phase maylast 40 or 50 years Some analysts have worried that the rapidly growing labor forcein this phase might cause rising unemployment and falling capital labor ratios(Coale and Hoover 1958) Others have stressed the economic advantages of havinga relatively large share of the population in its working years calling these ademographic gift or bonus (Williamson and Higgins 2001 Bloom Canning andMalaney 2000) In India the bonus occurs between 1970 and 2015 If income perperson of working age is unaffected the decline in dependents per worker wouldby itself raise per capita income by 22 percent adding 05 percent per year to percapita income growth over the 45-year span There is considerable controversyabout whether this demographic bonus really affects economic development con-tinuing debates from the 1980s (National Research Council 1986 Kelley 1988Birdsall Kelley and Sinding 2003)

In a third phase increasing longevity leads to a rapid increase in the elderlypopulation while low fertility slows the growth of the working-age population Theold-age dependency ratio rises rapidly as does the total dependency ratio In Indiathis phase occurs roughly between 2015 and 2060mdashand it would last longer ifmortality decline were not assumed to cease in the simulation If the elderly aresupported by transfers either from their adult children or from a public sectorpension system supported by current tax revenues then a higher total dependencyratio means a greater burden on the working-age population To the extent that the

9 In some studies the boundary for childhood is taken to be 18 or 20 and for working ages it may be takento be 60 Any boundary is arbitrary as is the equal weighting of children and elders in forming these ratios

182 Journal of Economic Perspectives

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 17: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

elderly contribute to their own support through saving and asset accumulationearlier in their lives and dissave in retirement population aging may cause loweraggregate saving rates as life cycle savings models and some empirical analysessuggest (Williamson and Higgins 2001 Lee Mason and Miller 2000 but also seeDeaton and Paxson 2000) Nonetheless even with lower savings rates the capitallabor ratio may rise since the labor force is growing more slowly (Cutler et al 1990Lee et al 2000) This pattern of saving and wealth accumulation may arise eitherthrough individual life cycle savings or institutional requirement as in SingaporeThe net effect would then be to stimulate growth in labor productivity due tocapital deepening

At the end of the full transitional process for India shown in Figure 6 the totaldependency ratio is back near its level before the transition began but now childdependency is low and old-age dependency is high Presumably mortality willcontinue to decline in the twenty- rst century so that the process of individual andpopulation aging will continue No country in the world has yet completed thisphase of population aging since even the industrial countries are projected to agerapidly over the next three or four decades In this sense no country has yetcompleted its demographic transition

The Transition in Age Distribution by Current Development CategoryThe past and projected Total Dependency Ratios for the Least Less and More

Developed Countries are shown in Figure 7 that is the sum of the populationunder 15 and over 65 years divided by the population in the intermediate range of15ndash 64 years Remember that even in 1950 the Least Developed Countries hadhigher fertility and higher mortality than the Less Developed Countries andchange since then has been slower for them The Least Developed Countriesmoved slowly out of the phase of rising youth dependency and entered the bonusphase around 1980 For these countries the total dependency ratio is projected tofall sharply from 2000 to 2050 At the same time the median age is projected to riseby nine years by 2050 from 181 to 271 years

The Less Developed Countries entered the bonus phase earlier around 1970and will nish it around 2020 after which the total dependency ratio will be rather at since declining child dependency will offset rising old-age dependency Theirmedian age is projected to rise strongly by 133 years between 2000 and 2050 from252 to 385 years

The More Developed Countries are out of the bonus phase and have alreadyaged considerably They already have the median age that the Less DevelopedCountries are projected to achieve by 2050 at which time the median age in theMore Developed Countries will have risen another eight years to 452 years Thetotal dependency ratio in the More Developed Countries is projected to rise sharplyover the next 50 years as their low fertility increasingly affects labor force size andthe baby boom generations move into old age

The Demographic Transition Three Centuries of Fundamental Change 183

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 18: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

Lower Fertility or Longer Life ExpectancyBoth low fertility and longer life contribute to the aging of the population But

the implications of these factors for causes of shifts in the population distributionand for how society might react to the aging of the population are rather different

When population aging is due to declining fertility it raises the share of theelderly population without altering the remaining life expectancy (or the healthstatus or vigor) of older individuals Such aging re ects a choice made by individ-uals to raise fewer children The desire to have fewer children may be related to therise of public sector pensions which disconnect old-age support from individualfertility and may have played some role in causing low fertility in industrial nationsThe Least Developed Countries as a group are in the midst of their fertility declinewhich is causing a substantial proportion of their population aging While lowerfertility may go with reduced total parental expenditures on children it also raisesthe ratio of elderly to working-age people other things equal with no correspond-ing improvement in health to facilitate a prolongation of working years10 For thisreason population aging due to reduced fertility may well impose importantresource costs on the population regardless of institutional arrangements forold-age support

By contrast population aging due to declining mortality is generally associatedwith increasing health and improving functional status of the elderly While such

10 If low fertility is associated with increased human capital investments per child then these might leadto longer life for those children eventually

Figure 7Total Dependency Ratio by Level of Development 1950ndash2050

1950 1960

More Developed

Less Developed

Least Developed

1970 1980 1990 2000 2010 2020 2030 2040 205000

02

04

06

08

10

12

14

16

Source Historical and Middle Series forecasts are taken from United Nations (2003)

184 Journal of Economic Perspectives

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 19: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

aging puts pressures on pension programs that have rigid retirement ages thatproblem is a curable institutional one not a fundamental societal resource prob-lem since the ratio of healthy vigorous years over the life cycle to frail or disabledyears has not necessarily changed

Some Consequences of the Demographic Transition

The three centuries of demographic transition from 1800 to 2100 will reshapethe worldrsquos population in a number of ways The obvious changes are the rise intotal population from 1 billion in 1800 to perhaps 95 billion in 2100mdashalthoughthis long-term estimate is highly uncertain due largely to uncertainty about futurefertility The average length of life increases by a factor of two or three and themedian age of the population doubles from the low 20s to the low 40s Many MoreDeveloped Countries already have negative population growth rates and theUnited Nations projects that the population of Europe will decline by 13 percentbetween now and 2050 But many other changes will also be set in motion in familystructure health institutions for saving and supporting retirement and even ininternational ows of people and capital

At the level of families the number of children born declines sharply andchildbearing becomes concentrated into a few years of a womanrsquos life When thischange is combined with greater longevity many more adult years become avail-able for other activities The joint survivorship of couples is greatly increased andkin networks become more intergenerationally dense while horizontally moresparse These changes appear to be quite universal so far However whetherchildbearing is concentrated at younger ages or at older ages and whether age atmarriage rises or falls seems to vary from setting to setting and patterns are stillchanging even in the populations farthest along in the transition Parents withfewer children are able to invest more in each child re ecting the quality-quantitytradeoff which may also be one of the reasons parents reduced their fertility(Becker 1981 Willis 1974)

The processes that lead to longer life may also alter the health status of thesurviving population but the change could go either way For example mortalitydecline may permit less healthy or more disabled people to live longer therebyraising age-speci c disability rates Alternatively the decline in damage fromtrauma and disease in earlier life may reduce rates of disability and illness as peopleage For the United States it appears that years of life added by declining mortalityare mostly healthy years and that at any given age the health and functional statusof the population are improving (Costa 2002 Manton Corder and Stallard 1997Freedman Martin and Schoeni 2002) Apparently years of healthy life are growingroughly as fast as total life expectancy although this is more clearly true for yearsfree of mild disability than severe In other industrial populations the story is moremixed and no general conclusion is yet possible Trends in health vitality and

Ronald Lee 185

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 20: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

disability are of enormous importance for the economic and social consequences ofaging and indeed for human welfare more broadly

The economic pressures caused by the increasing proportion of elderly areexacerbated in the More Developed Countries by dramatic declines in the age atretirement which for US men fell from 74 years in 1910 to 63 years in 2000 (withthe average age of retirement measured by the age at which the male labor forceparticipation rate fell below 50 percent Burtless and Quinn 2001) Generouspublic pension programs permitting early retirement combined with heavy im-plicit taxes on those who continue working have played an important role incausing earlier retirement in industrial nations since the 1960s (Gruber and Wise1999) The growing ratio of retirees to workers is bringing various policy responsesSo-called ldquoparametricrdquo reforms tinker with pay-as-you-go de ned bene t programsreducing bene ts raising taxes and eliminating the incentives for early retirementSweden Italy and some other European countries have introduced ldquonotionalde ned contributionrdquo pension systems whereby pay-as-you-go systems mimic de- ned contribution programs removing incentives for early retirement and passingon to individual retirees the nancial risks of rising longevity Other countriesparticularly in Latin America are making the painful transition to funded publicsystems Often these policy changes encounter erce opposition from workers butpopulation aging makes reform inevitable In some countries like the UnitedStates population aging will generate more intense nancial pressures on publiclyfunded health care systems than it does on pension systems Overall the proportionof US GDP spent on government programs for the elderly is projected nearly totriple over the next 75 years without reforms while the public expenditure sharesfor the children and working age people remain relatively at (Lee and Edwards2002)

Population aging together with the growth of age-related public transfersystems for pensions education and health creates massive positive scal external-ities to childbearing In aging high-income nations with generous support for theelderly the net present value of future taxes minus bene ts for an incrementalbirth may be several hundred thousand dollars (Lee 2001) giving governments apowerful incentive to encourage childbearing In developing countries withyounger populations and public programs focused on children the scal external-ities and incentives run in the opposite direction (Lee and Miller 1990)

At the international level there are intriguing issues about the extent to whichthe ow of people and capital across borders may offset these demographicpressures As population growth has slowed or even turned negative in the MoreDeveloped Countries it is not surprising that international migration from third-world countries has accelerated Net international migration to the More Devel-oped Countries has experienced a roughly linear increase from near-zero in theearly 1950s to around 23 million per year in the 1990s Of course these netnumbers for large population aggregates conceal a great deal of offsetting inter-national gross migration ows within and between regions (United Nations 2002)

186 Journal of Economic Perspectives

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 21: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

For example prior to 1970 Europe was a net sending region but since then it hasbeen a net receiver of 17 million immigrants During the past decade repatriationof African refugees reversed the net ows from the Least Developed Countries Butoverall while More Developed Countries may seek to alleviate their populationaging through immigration UN simulations indicate that the effect will be onlymodest since immigrants also grow old and their fertility converges to receivingcountry levels

If in ows of immigrants only partially offset population aging might interna-tional ows of capital offer a way of cushioning the nancial effects of populationaging Population aging may cause declining aggregate saving rates but withslowing labor force growth capitallabor ratios will probably rise nonetheless andpro t rates fall particularly if there is a move toward funded pensions Capital owsfrom the More Developed Countries into the Less and Least Developed Countriesmight help to keep the rate of return earned on pension funds from fallingHowever simulations indicate that exporting capital to the younger Less Devel-oped Economies would help the industrial economies only slightly The muchsmaller size of third-world economies would limit the gains (Borsch-Supan et al2001)

Dramatic population aging is the inevitable nal stage of the global demo-graphic transition part and parcel of low fertility and long life It will bring seriouseconomic and political challenges Nonetheless life in aging capital-intensive andculturally diverse high-income countries should be pleasant provided our institu-tional structures are suf ciently exible to allow us to adapt our life cycle plans tothe changing circumstances and provided we are willing to pay for the health careand the extended retirement that we apparently want

y Research for this paper was funded by a grant from NIA R37-AG11761 Timothy Millerprovided statistical and computational support Monique Verrier provided editorial assis-tance The editors of the journal made many helpful suggestions

The Demographic Transition Three Centuries of Fundamental Change 187

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 22: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

References

Barker D J P ed 1992 Fetal and InfantOrigins of Adult Disease London British MedicalJournal

Becker Gary 1981 A Treatise on the FamilyCambridge Mass Harvard University Press

Bhat P N Mari 1989 ldquoMortality and Fertilityin India 1881ndash1961 A Reassessmentrdquo in IndiarsquosHistorical Demography Studies in Famine Diseaseand Society Tim Dyson ed London CurzonPress pp 73ndash118

Biraben Jean-Noel 1980 ldquoAn Essay Concern-ing Mankindrsquos Evolutionrdquo Population Selected Pa-pers December 4 pp 1ndash13

Birdsall Nancy Allen C Kelley and StevenSinding eds 2003 Population Matters DemographicChange Economic Growth and Poverty in the Develop-ing World Oxford Oxford University Press

Bloom David David Canning and PiaMalaney 2000 ldquoDemographic Change and Eco-nomic Growth in Asiardquo in Population Change inEast Asia Transition a supplement to Volume 26of Population and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 257ndash90

Bongaarts John 1978 ldquoA Framework for An-alyzing the Proximate Determinants of FertilityrdquoPopulation and Development Review 41 pp 105ndash32

Bongaarts John 2001 ldquoFertility and Repro-ductive Preferences in Post-Transitional Societ-iesrdquo in Global Fertility Transition a supplement toVolume 27 of Population and Development ReviewRodolfo Bulatao and John Casterline eds NewYork Population Council pp 260ndash 81

Borsch-Supan Axel and Joachim Winter2001 ldquoAging and International Capital FlowsrdquoInstitut fur Volkswirtschaftslehre und StatistikNo 605-01

Burtless Gary and Joseph F Quinn 2001ldquoRetirement Trends and Policies to EncourageWork among Older Americansrdquo in EnsuringHealth and Income Security for an Aging WorkforceP P Budetti R V Burkhauser J M Gregoryand H A Hunt eds Kalamazoo Mich Upjohnpp 375ndash 415

Casterline John 2001 ldquoThe Pace of FertilityTransition National Patterns in the Second Halfof the Twentieth Centuryrdquo in Global FertilityTransition a supplement to Volume 27 of Popu-lation and Development Review Rodolfo Bulataoand John Casterline eds New York PopulationCouncil pp 17ndash52

Chamie Joseph 2001 ldquoWorld Population

in the 21st Centuryrdquo Paper presented at theTwenty-Fourth IUSSP General Population Con-ference Salvadore Bahia Brazil August 18ndash24

Coale Ansley and Paul Demeny 1983 Re-gional Model Life Tables and Stable PopulationsNew York Academic Press

Coale Ansley J and Edgar M Hoover 1958Population Growth and Economic Development inLow-Income Countries Princeton Princeton Uni-versity Press

Coale Ansley J and Roy Treadway 1986ldquoA Summary of the Changing Distributionof Overall Fertility Marital Fertility and theProportion Married in the Provinces ofEuroperdquo in The Decline of Fertility in EuropeAnsley J Coale and Susan Cotts Watkins edsPrinceton Princeton University Press pp 31ndash181

Costa Dora 2002 ldquoChanging Chronic Dis-ease Rates and Long-Term Declines inFunctional Limitation among Older MenrdquoDemography February 391 pp 119 ndash38

Cutler David James Poterba Louise Sheinerand Lawrence Summers 1990 ldquoAn Aging Soci-ety Opportunity or Challengerdquo Brookings Paperson Economic Activity 1 pp 1ndash73

Deaton Angus and Christine Paxson 2000ldquoGrowth Demographic Structure and NationalSaving in Taiwanrdquo in Population Change in EastAsia Transition a supplement to Volume 26 ofPopulation and Development Review Cyrus Chuand Ronald Lee eds New York PopulationCouncil pp 141ndash93

Flinn Michael W 1981 The European Demo-graphic System 1500ndash1820 Baltimore JohnsHopkins University Press

Fogel Robert 1994 ldquoEconomic Growth Pop-ulation Theory and Physiology The Bearing ofLong-Term Processes on the Making of Eco-nomic Policyrdquo American Economic Review June843 pp 369 ndash95

Freedman Vicki A Linda G Martin and Rob-ert F Schoeni 2002 ldquoRecent Trends in Disabil-ity and Functioning among Older Adults in theUnited States A Systematic Reviewrdquo Journal of theAmerican Medical Association 28824 pp 3137ndash146

Galloway Patrick 1986 ldquoLong-Term Fluctua-tions in Population and Climate in the Preindus-trial Erardquo Population and Development ReviewMarch 121 pp 1ndash24

Galor Oded and David N Weil 1996 ldquoThe

188 Journal of Economic Perspectives

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 23: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

Gender Gap Fertility and Growthrdquo AmericanEconomic Review 863 pp 374 ndash87

Gertler Paul J and John W Molyneaux 1994ldquoHow Economic Development and Family Plan-ning Programs Combined to Reduce IndonesianFertilityrdquo Demography February 311 pp 33ndash 64

Gruber Jonathan and David Wise 1999 SocialSecurity Programs and Retirement around the WorldChicago University of Chicago Press

Kannisto Vaino Jens Lauritsen A RogerThatcher and James W Vaupel 1994 ldquoReduc-tions in Mortality at Advanced Ages Several De-cades of Evidence from 27 Countriesrdquo Populationand Development Review 204 pp 793ndash 810

Keilman Nico 1997 ldquoEx-Post Errors in Of -cial Population Forecasts in Industrialized Coun-triesrdquo Journal of Ofcial Statistics 133 pp 245ndash77

Kelley Allen C 1988 ldquoEconomic Conse-quences of Population Change in the ThirdWorldrdquo Journal of Economic Literature December26 pp 1685ndash728

Lee James and Wang Feng 1999 One Quarterof Humanity Malthusian Mythologies and ChineseRealities 1700ndash2000 Cambridge Harvard Uni-versity Press

Lee Ronald 1987 ldquoPopulation Dynamics ofHumans and Other Animalsrdquo Demography No-vember 244 pp 443ndash66

Lee Ronald 1997 ldquoPopulation DynamicsEquilibrium Disequilibrium and Consequencesof Fluctuationsrdquo in Handbook of Population andFamily Economics Volume 1B Mark Rosenzweigand Oded Stark eds Amsterdam North Hol-land pp 1063ndash115

Lee Ronald 2001 ldquoExternalities to Child-bearingrdquo in International Encyclopedia of the Socialand Behavioral Sciences Volume 3 Neil J Smelserand Paul B Baltes eds Oxford UK ElsevierScience Ltd pp 1686ndash 689

Lee Ronald and Michael Anderson 2002ldquoMalthus in State Space Macro Economic-Demographic Relations in English Historyrdquo Jour-nal of Population Economics 152 pp 195ndash220

Lee Ronald and Lawrence Carter 1992ldquoModeling and Forecasting the Time Series ofUS Mortalityrdquo Journal of the American StatisticalAssociation September 87419 pp 659ndash71

Lee Ronald and Ryan Edwards 2002 ldquoTheFiscal Effects of Population Aging in the USAssessing the Uncertaintiesrdquo in Tax Policy and theEconomy Volume 16 James Poterba ed Cam-bridge MIT Press pp 141ndash 81

Lee Ronald and Timothy Miller 1990 ldquoPop-ulation Growth Externalities to Childbearing

and Fertility Policy in the Third Worldrdquo in Pro-ceedings of the World Bank Annual Conference onDevelopment Economics 1990 supplement to TheWorld Bank Economic Review and to The WorldBank Research Observer Oxford Oxford Univer-sity Press pp 275ndash304

Lee Ronald Andrew Mason and TimothyMiller 2000 ldquoLife Cycle Saving and the Demo-graphic Transition The Case of Taiwanrdquo in Pop-ulation Change in East Asia Transition a supple-ment to Volume 26 of Population and DevelopmentReview Cyrus Chu and Ronald Lee eds NewYork Population Council pp 194ndash222

Livi-Bacci Massimo 2000 The Population ofEurope Oxford Blackwell

Manton Kenneth Larry Corder and Eric Stal-lard 1997 ldquoChronic Disability Trends in ElderlyUnited States Populations 1982ndash1994rdquo Proceed-ings of the National Academy of Science March 94pp 2593ndash598

Meltzer David 1992 ldquoMortality Decline theDemographic Transition and EconomicGrowthrdquo PhD Dissertation University of Chi-cago Department of Economics December

Mitchell Brian R 1975 European Historical Sta-tistics 1750ndash1970 New York Columbia Univer-sity Press

National Research Council 1986 PopulationGrowth and Economic Development Policy QuestionsWorking Group on Population Growth and Eco-nomic Development Washington DC NationalAcademy Press

National Research Council 2000 Beyond SixBillion Forecasting the Worldrsquos Population Panel onPopulation Projections John Bongaarts andRodolfo A Bulatao eds Washington DC Na-tional Academy Press

Nerlove Marc 1974 ldquoHousehold and Econ-omy Toward a New Theory of Population andEconomic Growthrdquo Journal of Political Economy822 pp S200ndash18

Oeppen Jim and James Vaupel 2002 ldquoBro-ken Limits to Life Expectancyrdquo Science2965570 pp 1029ndash 030

Olshansky S Jay and Bruce A Carnes 2001The Quest for Immortality New York W W Nortonamp Company

Pampel Fred 2002 ldquoCigarette Use and theNarrowing Sex Differential in Mortalityrdquo Popula-tion and Development Review March 281 pp 77ndash104

Preston Sam 1980 ldquoCauses and Conse-quences of Mortality Declines in Less DevelopedCountries During the Twentieth Centuryrdquo inPopulation and Economic Change in Developing

Ronald Lee 189

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives

Page 24: The Demographic Transition: Three Centuries of Fundamental ...economie.ens.psl.eu/IMG/pdf/lee_2003.pdf · Widespread data on fertility for the decades after World War II con”rm

Countries Richard Easterlin ed Chicago Uni-versity of Chicago Press pp 289ndash360

Pritchett Lant H 1994 ldquoDesired Fertility andthe Impact of Population Policiesrdquo Populationand Development Review March 201 pp 1ndash55

Riley James 2001 Rising Life Expectancy AGlobal History Cambridge Cambridge UniversityPress

Schultz Paul 1994 ldquoHuman Capital FamilyPlanning and Their Effects on PopulationGrowthrdquo American Economic Review May 842pp 255ndash 60

Tuljapurkar S N Li and C Boe 2000 ldquoAUniversal Pattern of Mortality Decline in the G7Countriesrdquo Nature June 15 405 pp 789 ndash92

United Nations 2002 World Population Pros-pects The 2000 Revision Volume 3 Analytical ReportSales No E01XIII20

United Nations Population Division 1999The World at Six Billion New York United Na-tions

United Nations Population Division 2000Long-Range World Population Projections Based onthe 1998 Revision CD-ROM New York UnitedNations

United Nations Population Division 2001World Population Prospects The 2000 Revision Disk

2 Extensive Set CD-ROM New York United Na-tions February

United Nations Population Division 2003ldquoWorld Population Prospects The 2002 Revi-sionrdquo Available at ^httpwwwunorgpopindatahtmlamp

Van de Kaa Dirk 1987 ldquoEuropersquos SecondDemographic Transitionrdquo Population Bulletin421 pp 1ndash57

Williamson Jeffrey and Matthew Higgins 2001ldquoThe Accumulation and Demography Connectionin East Asiardquo in Population Change and EconomicDevelopment in East Asia Andrew Mason ed Stan-ford Stanford University Press pp 123ndash54

Willis Robert 1974 ldquoA New Approach tothe Economic Theory of Fertility Behaviorrdquo inThe Economics of the Family T W Schultz edChicago University of Chicago Press pp14 ndash25

Willis Robert 1994 ldquoEconomic Analysis ofFertility Micro-Foundations and Aggregate Im-plicationsrdquo in Population and Economic Develop-ment and the Environment Kerstin LindahlKiessling and Hans Landberg eds Oxford Ox-ford University Press pp 139ndash72

Wilson Chris 2001 ldquoOn the Scale of GlobalDemographic Convergence 1950ndash2000rdquo Popula-tion and Development Review 271 pp 155ndash72

190 Journal of Economic Perspectives