+
6-1
Update

Yes, I have gotten your exams

No, I haven’t graded them yet

Your thoughts on the exam?
+
7-2
Readings

Chapter 6 (and 7)


Do you have chapter 6 (pop) in your book?
New article on website: Ecological Macroeconomics:
Consumption, Investment, and Climate Change
+
7-3
Homework

Due next Tuesday: bring in a news article that
touches/discusses environmental economic issue(s)
+
Chapter 6
The Population Problem
+
6-5
Historical Perspective
World Population Growth

Population growth is a significant source of nonsustainability.

Average rates of population have declined in most countries
except for on the continent of Africa.

Both fertility rates and birthrates have exhibited downward
trends recently.

Most developing countries are expected to have substantial
increases in their populations. Poorer countries are expected
to contribute to 98% of population growth between 1998 and
2025.
+ TABLE 6.1
Average Annual Rate of Growth
by Region and Development Category:
1950–2050 [In percent] (1 of 2)
6-6
+ TABLE 6.1
Average Annual Rate of Growth by
Region and Development Category: 1950–2050 [In
percent] (2 of 2)
6-7
+
TABLE 6.1 Average Annual Rate of Growth by Region 6-8
and Development Category: 1950–2050 [In percent]
+
6-9
+
250
Population
growth in Mashreq
6-10
(actual
and projected) (millions)
230
210
190
170
150
130
110
90
70
50
1969-1971
1990-1992
2002-2004
2015
Source: UN Population Division. 2002 Revision. World Population Prospects
2030
2050
+
Population growth (actual and projected)
140
6-11
(millions)
120
100
Egypt
80
Iraq
Syria
60
Lebanon
OPT
Jordan
40
20
0
1969-1971
1990-1992
2002-2004
2015
2030
Source: UN Population Division. 2002 Revision. World Population Prospects
2050
+
6-12
Definitions..

Total fertility rate is the number of live births an average
woman has in her lifetime; used to determine what level of
fertility could lead to a stationary population.

A stationary population is one in which the birthrate is
constant and equal to the death rate. With a stationary
population, the growth rate is zero.

The replacement rate is the level of total fertility that is
compatible with a stationary population. In the United States,
the replacement rate is 2.11.

Currently the total U.S. fertility rate (2.04) is below the
replacement rate.
+
6-13
+
6-14
 During
the last 55 years, the Arab population
has increased from around 72 million in 1950
to about 300 million in 2005,
 About
5% of the total world population.
+
6-15
Rural to Urban Migration (1961-2003)
Source: World Bank data
+
Rural to Urban Migration (1961, 1980,
2003)
6-16
+
Densities in selected Arab countries, inhabitants per sq. km., 2007
(Source: World Bank 2007)
Ex. Dense populations in Gaza’s refugee camps contributed to
aquifer depletion, which resulted in saltwater intrusion and
saline water unsuitable for irrigation
6-17
+
Population density (inhabitant per km2)
(2006)
6-18
+
6-19
Population growth and economic
development

Questions
 Does
population growth enhance or inhibit the
opportunities of a country’s citizens?
 Does the answer depend on the stage of
development?
 Given that several countries are now entering a
period of declining population growth, what are
the possible effects of this decline on economic
growth?
+ Effects of Population Growth on Economic
Development

Marginal product (MP) and average product (AP)
determines the effect of population on output.

If the marginal product of an additional person is
positive, then more people means more output.

However – the existence of a positive marginal product
is not a very appropriate test of the desirability of
population growth!

If the marginal product of an additional person is lower
than the average product, then even though economic
growth would increase in aggregate terms, a rising
population reduces per capita welfare (on average).
6-20
+
6-21
In other words

How does population growth affect the average citizen?

In the range of marginal productivities between zero and the
average product, economic growth measured in aggregate
terms would increase

But

Measured in per capita terms, would decrease
A
simple definition of output:
O=L*X
Where O is the output level, X is the output per
worker, L is the number of workers. Dividing both
sides by population:
O L
 X
P P
 Output
per capita (O/P) is determined by two factors:
the product of output per worker (X) and the share of
population (L/P) that is in the labor force.
6-22
+ Age Structure of Two Populations for the Year 2000

Age structure effect is the most direct effect of population
growth on the percentage of people employed.
6-23
+
6-24
Poverty in the Mashreq
Poverty incidence (%)
Number of poor (millions)
14
20
18
16
14
12
10
8
6
4
2
0
13.7
12
10
8
6
4
2.1
0.7
2
0.3
0
Egypt
(2005)
Jordan
(2002)
Lebanon
(2005)
Source: LAS, 2009
Syria
(2004)
Egypt
(2005)
Jordan
(2002)
Lebanon
(2005)
Syria
(2004)
+
6-25
High and Rising Unemployment
(youth effect)
Unemployment among youth
(%) 2005/2006
Youth’s share in total
unemployment (%) 2005/2006
Unemployment rates for for Arab women > Arab
men (31.2% compared to 25%; highest in Jordan:
59%)
Only region where proportion of women in
agriculture is increasing: 28.4% to 31 % in Mashreq
Source: ALO, 2008
+
6-26
Additional factors

rapid growth?

Youth effect

Retirement effect

Female availability effect (slower growth rate + fewer children =
more females in labor force)

Side note: how to define labor for mothers? Venezuelan constitution
Both the dominance of the youth effect (over the retirement effect) and
the female availability effect suggest that rapid population growth
reduces the % of the population in the labor force  lowering
economic growth per capita
+
6-27
Other models..


Availability of savings

Availability of savings constrains the level of additions to the
capital stock

Availability of savings is affected in part by age structure (older
save more)

All other things being equal: societies with rapidly growing
populations could be expected to save proportionately less

The lowered availability of savings would lead to lower amounts of
capital stock and lower productivity per worker
Limited substitution possibilities exist: law of diminishing
marginal productivity

In the presence of a fixed factor (land or raw materials, for
example) successively larger additions of a variable factor (labor)
will eventually lead to a decline in the marginal productivity of the
variable factor
average of arable land (ha) per capita
+
in the Mashreq
0.3
0.25
0.2
0.15
0.1
0.05
0
1961-1970
1971-1980
Source: World Bank data
1981-1990
1991-2003
+
6-29

Does growth in output per capita have to be restrained by
population growth? Could population growth be enhancing?

One argument is that population growth enhances per capita
growth  technological progress and economies of scale
+
6-30
Better technology shifts productivity
+
6-31
Economies of scale?

Economies of scale occur when increases in inputs lead to a
more than proportionate increase in output (US is an
example)

w/o trade restrictions – market is global not domestic

Level of domestic population has little to do w/ the ability to
exploit economies of scale in the modern economy w/o
borders
+
6-32
Let’s examine data

If population growth reduces per capita economic growth,
then we should be able to see lower growth in per capita
income in countries with higher population growth rates – all
other things being equal

A study by the National Research Council (1986) found that
the evidence does not support the expectations. They found:

Slower population growth would raise the amount of capital per
worker and thus the productivity per worker

Slower population growth unlikely to result in net reduction in
agricultural productivity; might raise it

National population density and economies of scale are not
related

Rapid population growth puts more pressure on depletable AND
renewable resources
+
6-33
more

Rapid population growth may initially be advantageous but
ultimately as capacity constraints become binding, becomes
inhibiting. Impact is larger in less developed countries

Rapid population growth may also increase the inequality of
income. Why?
+
6-34
Estimates of Child-Rearing
Expenditures
+
6-35
The Population/Environment
Connection

Population density, combined with poverty, has
significant negative effects on environmental quality.

The use of marginal lands leads to topsoil losses.

Boserup, writes about the “induced innovation
hypothesis” which says that increasing populations,
trigger increased demand for agricultural goods. Land
scarcity, however, results in agricultural innovations and
increased sustainability.

The opposite view, the “downward spiral hypothesis”
posits poverty and degradation are reinforcing.

Be sure to read the Debate 6.1
+ Effects of Economic Development on
6-36
Population Growth
3
stages of population growth – theory of demographic
transformation
Stage 1: immediately prior to industrialization during which time
birthrates are stable and are slightly higher than death rates.
 Stage 2: immediately following the initiation of industrialization
during which time death rates fall dramatically with no change in
birthrates. The reduction in mortality causes a rise in the
population growth rate.
 Stage 3: involving large declines in the birthrate that exceed
continued declines in the death rate. This period involves further
increases in life expectancy, but smaller population growth rates
than in stage 2.

+
6-37
The Demographic Transition
+
6-38
Problems to the theory

Example: effect of HIV/AIDS on death rates.

Demographic transition theory presumes that with
development comes falling death rates and increasing life
expectancy, producing an increase in population growth until
the subsequent fall in birthrates

AIDS  large increases in death rates and decrease in life
expectancy is causing population to decline, not increase
(Botswana, South Africa, Zimbabwe)

Assumption: reductions in population growth rates
accompany rising standards of living, at least in the long run
+
Who has
read
Chapter 6?
And why not?
6-39
+
6-40
Economic approach to population
control

Is the current rate of population growth efficient?
Sustainable?

Issue of sustainability most easily dealt with in specific
natural resource settings (eg – ability to produce sufficient
food) – Let’s defer discussion

To establish whether or not population control is efficient ->
need to discover any potential behavioral biases toward
overpopulation. Will parents always make efficient
childbearing decisions?
+
6-41
Will parents always make efficient
childbearing decisions? No.
1.
Childbearing decisions impose external
codes outside the family
2.
Prices of key commodities or services
related to childbearing and child rearing
may be inefficient
3.
Parents may not be fully informed about
or may not have reasonable access to
adequate means for controlling births
+ The Economic Approach to Population
Control – two sources of market failure

Congestion externalities will arise if more people are
added to limited space. Congestion externalities are one
source of market failure.

These external costs are intensified if the resource base
is treated as an open access, common pool resource.

Income equality is a public good. High population
growth may exacerbate income inequality.

Due to external costs and benefits, decisions that may
be optimal for individual families will result in
inefficiently large populations.
6-42
+
6-43
 Subsidized
food artificially lowers the cost
of children. Tax financed education provides
an incentive to have more children as the
marginal cost of the education of an
additional child is lower than the true social
cost.
 Population
topic.
control is a politically sensitive
+
6-44
What to do?





Successful population control involves
 lowering the desired family size and
 providing sufficient access to contraception and family
planning information.
The economic approach to population control is aimed at
indirectly lowering the desired family size.
How?
Identify those factors that affect desired family size and
change those factors
Major model => microeconomic theory of fertility (all
other things being equal, the more expensive children
become, the fewer will be ‘demanded’)
+

The microeconomic theory of fertility


6-45
This theory begins with the viewpoint children are consumer durables
and the demand for them will be downward sloping.
Other factors
 Kind of market?
 Status of parents?
 Infant mortality?
 Increased employment associated with development shared equally?
 Opportunity cost of mother’s time?
 Rural to urban migration?

As in any market with a negative externality, reducing demand
(marginal benefits) or raising marginal costs can move the
equilibrium toward the economically efficient outcome.

Women's income earning potential can be increased through
investment in human capital or physical capital. Funds for
investment, however, are needed from banks which require
collateral. Do women own property?
+
6-46
Yes… and No. Your exams….

The mean: 58%

Highest grade: 89%

Lowest grade: 44%

You can’t see the exams until Jihane takes the exam on
Tuesday. Wednesday, I will give the exams to you – and you
will redo the exams.

In the meantime…
+
6-47
Homework: Due Wednesday.
1.
The microeconomic theory of fertility provides an
opportunity to determine how public policies that were
designed for quite different purposes could affect fertility
rates. Identify some public policies, for example, subsidies
to people who own their own home, that could have an effect
on fertility rates and describe the relationship. Identity the
country whose policies you are examining.
2.
Education is either funded by taxes or by tuition. Suppose
that a community needs more money for education. If they
raise the money from taxes or from increases in tuition,
would the cost of education have the same effect on the
desired number of children? Using the mirco-economic
theory of fertility, trace the expected impacts.
3.
“According to the theory of demographic transition,
industrialization lowers population growth.” Discuss.