Causal links from fertility to poverty: what do we
know and how can we find out more?
Robert Eastwood
Department of Economics
Sussex University
November 2006
FERTILITY DECLINE AND POVERTY DECLINE:
EVIDENCE FROM CROSS-COUNTRY
REGRESSIONS AND OTHER MACRO ANALYSIS
Growth effects/ distribution effects
Growth effects: Kelley-Schmidt 1995 find for the 1980s
that the fertility fall in the median developing country
(about 4 per 1000 in the net birth rate) raised growth
rates of GDP/person by about 1.4% p.a.
Distribution effects: Eastwood-Lipton 1999 find lagged
poverty-reducing effects even when controlling for mean
household consumption. At a ten-year horizon gains
from growth and distribution contribute equal amounts
to poverty reduction. The median fertility fall, as above,
is estimated to lower dollar-a-day poverty incidence
from 18.9% to 12.6% at the mean.
MECHANISMS
Transitional effects versus steady-state effects: consider
growth and distribution separately.
Growth effects:
Transitional effects already discussed by DC. Key issue for
Africa is whether extra supplies of labour (female
participation rate) and savings will be productively used, as
in East Asia.
Are there benefits of fertility decline in steady state, or are all
the benefits transitional? In (demographic) steady state we
need to consider age structure, and the level and rate of
growth of population
Permanent age structure effect: higher life expectancy
analogous to a once-for-all technological advance (return to
human capital, lower costs of child mortality).
Does the rate of growth (or level) of population matter?
In Kelley-Schmidt, the answer from cross-country
econometrics was no for the 1960s and 1970s, because
some cases of low population growth were due to low
fertility (good) and others due to high mortality (bad).
Theory suggests very long-lasting, but not eternal, growth
gains from slower population growth via more capitaldeepening or less capital-shallowing (Solow model).
Can we say, in practice, which countries are experiencing
capital shallowing, and how important is the population
growth effect?
For Africa, recent World Bank estimates, which take
account of exhaustible resource depletion and pollution,
give the answers: ‘most’ and ‘substantial’.
World Bank capital-shallowing estimates (2006)
Gross national saving is adjusted up for education spending
and down for depreciation, natural resource depletion (energy,
metals, minerals, net deforestation) and pollution damage
(particulates and CO2 emissions) to give adjusted net saving.
A measure of tangible capital, including land, is then used to
arrive at a population-growth-adjusted estimate of national
savings gaps. Out of 32 African countries all but 5 have positive
population growth adjusted ‘savings gaps’ and for 14 countries
the gap exceeds 20% of GNI/cap.
These estimates ignore soil degradation (might add 5% of
GNI/cap) and, for Africa, CO2 emissions. The population growth
effects are large – for many African countries adjusted net
saving is positive but wealth per capita is nevertheless falling.
Distribution effects: how do falls in fertility lower inequality?
Dependency effect: disproportionate fall, in poor households,
in household members per person of working age.
Acquisition effect: disproportionate rise, in poor households, in
acquisition of consumables per person of working age.
Which is more important? Do distributional gains arise (a)
arithmetically, because fertility falls are concentrated in poor
households (dependency effect) or (b) via rises in real wages
and/or employment, disproportionately benefitting poor
households that rely most on income from labour (acquisition
effect).
NB Labour supply effects are complex: a positive acquisition
effect could arise initially via employment (raised female
participation), and later via real wages (fewer entrants to the
workforce).
Is the distribution effect transitional or steady-state in
nature?
It can be both, whether via dependency or acquisition.
To illustrate the acquisition effect in steady state, consider
the example of Niger - WB estimated population-adjusted
saving gap=50% of GNI/capita, seven-eighths of which is
attributable to its population growth rate of 3.3% p.a.
Lower population growth in this case would, independently
of the demographic transition, reduce capital-shallowing,
raise real wages and employment and reduce poverty.
FERTILITY DECLINE AND POVERTY DECLINE: EVIDENCE
FROM HOUSEHOLD STUDIES
Can we link micro to macro in principle?
Only partly. A cross-section micro study cannot pick up macro
effects of reduced fertility, such as those operating through the
real wage (either via eventually lower labour supply - or increased
labour demand consequent on higher savings and investment).
Fertility demand versus supply
For both scientific and policy purposes it is critical to know to what
extent variations in fertility reflect demand and supply factors. This
remains very controversial.
On the view that most variation in fertility is variation in desired
fertility (Pritchett 1994), the scientific consequence is that it
becomes very difficult to identify effects of exogenous changes in
fertility on household well-being (e.g. poverty, schooling,
participation, child health), because of a lack of instruments.
Example
Datta Dupta and Dubey, JDS 2006. Attempt to identify a link from
higher fertility to higher household poverty risk for India by
exploiting son-preference. Use ‘starting with two girls’ as an
instrument for finishing with more than two children. Find a
positive but insignificant effect.
Illustrates the difficulty of identifying the effects of interest using a
cross-section of households. (1) Macro effects cannot be picked
up, (2) Unless instruments are very strongly correlated with the
variable instrumented (first stage F-stat > 10) little confidence can
be placed on the results (Bound, Jaeger and Baker 1995).
The policy consequence of the Pritchett view is that attention is
focussed on market failures and externalities in making the case
for policy interventions.
Conversely, if significant fertility variation can be attributable to
supply-side factors, e.g. family planning effort (FPE), then at
the scientific level it becomes easier to identify the
consequences of (exogenous) fertility variation and of FPE
itself, and at the policy level, attention will be directed to FPE.
Examples
Miller 2005 (DC’s presentation). Excellent example of both of
the above points for urban Colombia. Scientific: possible to
identify fertility-to-education effects for women, using
exogenous variation in FPE. Policy: possible to do a rough
cost-benefit calculation of FPE against alternative
interventions.
Are there any examples in Sub Saharan Africa where we have
had reasonably exogenous variation in FPE across a country
or region? If so, is there data?
Conclusions for research and policy in relation to SSA
Explanations for high fertility and fertility-reducing policies
Many plausible candidates to explain continued high levels of
desired fertility in parts of SSA (e.g. household structures that
allow externalization of child costs, opportunities for female
employment, absence of public provision for the elderly) but
testing and quantification seem very difficult. Too few
exogenous instruments with sufficient cross-household
variation.
More promising, perhaps, to try to identify effects of FPE, but
are there Matlab or Colombia-like examples for Africa with
exogenous variation in FPE effort?
At present we know too little about the relative returns to
demand-side and supply-side fertility-reducing policies in SSA.
Making the most of any demographic gift in SSA
Optimistic view, by analogy with East Asia, would be that extra
savings and female labour supply, initially, would combine to
raise output and reduce poverty. This requires rises in labour
demand together with effective financial intermediation
mechanisms.
Questions about the agricultural/non-agricultural balance cannot
be avoided. To the extent that the potential for extra employment
is predominantly in agriculture, and extra savings generated in
rural areas, potential returns to agricultural research and land
reform are raised: the introduction of new varieties and land
equalization both have the potential to raise agricultural
employment.
Research on India (Ravallion/Chen) has demonstrated the
importance there of agricultural growth for poverty reduction.