POPULATION, EDUCATION
and
HUMAN CAPITAL
Cypher and Dietz,
Ch. 12
The Population Problem:
What is it?
Rapid population growth can cause the total
population to exceed a nation’s productive
capacity so that real income per person either
falls or rises unnecessarily slowly.
%∆GNP per capita = %∆GNP - %∆population
Rate of Natural Population Growth (pn):
Definition
pn = annual %∆ in natural population
= (crude birth rate – crude death rate)
10
Crude birth rate = # of live births per 1000 population
Crude death rate = # of deaths per 1000 population
Rate of Actual Population Growth (pa):
Definition
pa = annual %∆ in actual population
= pn + m
where;
m = immigrants per 100 population – emmigrants per 100 population
CBRs, CDRs, and the natural rate of population growth
Source:
Cypher &
Dietz (2004):
p. 354
5
The demographic transition
Source: Cypher & Dietz (2004): p. 356
6
Fertility rate: Definition
F = total # of children that the average woman is
expected to have
F = f (y, e, S)
y = per capita income
e = # of females per 100 males in primary school
S = social, cultural, political factors in the country
such that fy < 0 and fe < 0;
but relationship between F and S is indeterminate.
Population Growth and Income per Capita:
What is the relationship?
Malthus argued: income ↑ → population growth ↑
BUT data shows: income ↑ → population growth ↓
i.e. fy < 0
How to explain?
Population Growth and Income per Capita:
In economies with lower levels of income, children play multiple roles
for parents:
• They act as additional source of labor, contributing to family income;
• Older girls help with child care and household tasks;
• Children act as a form of insurance for parents at old age;
• Infant mortality rates are higher; hence families have more children
to cover themselves for such risk
In economies with higher levels of income,
• Most of the above factors do not exist as a motivation for having
children;
• Rather children are seen as an entertainment for parents;
• and also to carry on the family name;
• The opportunity cost to women of having children is much higher.
(this is also fe < 0)
What is Human Capital?
• Labor not as a homogenous factor of production; but a differentiated
and moldable input into production, i.e. as human capital.
• Hence production function is revised
from Y = A f(K, L) → Y = A f(K, L, H)
• Human K is not a sufficient, yet a necessary factor for growth.
• World Bank study (1993) finds that the level of primary education in
1960 predicted as high as 58% (Japan) to 87% (Thailand) share of
growth experienced by the high performance east Asian economies
(HPAEs) in 1960-85.
• High human K increases the ability of HPAEs to adopt, adapt and
indigenize the ever-expanding pool of “best practice” technological
knowledge, i.e. keep pace with the world production possibilities
“best practice” frontier.
Total Factor Productivity TFP
TFP = %∆ output – [%∆K*Kshare in inputs + %∆L*Lshare in inputs]
Any positive remainder is interpreted as the increase in TFP.
TFP measures the synergistic effort of combining an economy’s
physical K and its human K which results in productivity increases
beyond the contribution of increases in physical quantities of the
individual inputs.
According to World bank HPAEs’ rate of TFP is twice that of any other
less-developed region.
1960-87: 28% of HPAEs’ growth due to TFP growth
14% of S. Asia’s growth due to TFP growth
0% of Africa & LAC growth due to TFP growth
Education and human capital accumulation
Source:
Cypher & Dietz
(2004): p. 364
12
Human Capital as an example of
Market Failure and the need for Public Subsidy
1. Public benefits of education > Private benefits of education
Even those who do not have children gain from positive
externalities of the children who do receive education
2. In developing countries no financial markets for the poor HHs to
borrow to capitalize future expected earnings from education;
so the market failure problem is even greater than that caused
by the divergence between private and social benefits.
3. Efficiency and Equity grounds is another rationale for
subsidizing primary and secondary education.
Dependency ratios, population age profile, and public expenditure on education
Source: Cypher
& Dietz (2004):
p. 370
14