Fertility and relative cohort size

This paper estimates the effect of changes in population age structure on fertility. Few factors are as inseparable from economic and demographic theories of underdevelopment as high fertility rates. Most of the empirical literature on fertility focuses on a small set of traditionally hypothesized determinants: incomes, men’s and women’s education, infant mortality, and the rural share of the population. More recently, Macunovich develops ideas by Easterlin about the potential impact of population age structure on fertility, and provides empirical evidence for its effects. We continue along the lines of Macunovich’s contribution by: (4) Estimating fertility equations in which age structure and the traditional determinants are included simultaneously. This may be interpreted as a test of robustness of one set of variables when controlling for the others. Or it may be interpreted as a test of hypotheses concerning the mechanisms whereby one set of variables affects fertility. (5) Testing for the consistency of cohort size effects across continents and between the developing and developed regions (6) Testing one aspect of the mechanism whereby cohort size is hypothesized to affect fertility, through women’s labor force participation. To accomplish these objectives, we econometrically estimate a static panel equation using aggregate panel data on the relevant variables for 90 developed and developing countries observed every 5 years over the period from 1950 to 1995. We find that: (4) Age structure effects are found in the hypothesized direction. They are remarkably large and very precisely estimated even after controlling for all the major competing determinants of fertility. Thus cohort size has strong effects that are independent of the effects of income, men’s and women’s labor force participation rates, men’s and women’s education, rurality, and infant mortality. (5) Cohort size effects are found in every continent within the developing world, as well as in the developed world. Their magnitudes are remarkably similar across continents and levels of development. Of all the variables included in the regressions, cohort size has the most consistently large and significant effect across all regions. (6) The estimates of cohort size effects survive controlling for women’s economic activity rates. This means that cohort size effects are mediated by more than women’s labor supply (and by more than all other effects controlled for in the specification). We are still in need of an empirically validated theory of why cohort size has a negative effect on fertility.fertility; population; cohort size

Age structure and productivity growth

Among the most central questions at the intersection of demography and economics is the impact of large scale demographic processes on long-run economic performance. The classical version of this inquiry, occupying thinkers from Malthus towards those from the mid-to-late 20th century, had to do with whether rapid population growth threatened economic growth. This classical inquiry has been superseded by more sophisticated questioning in which the focus on growth rate of the aggregate population has been replaced by focus on the growth rates of age-specific population sub-groups. Disaggregating the effects of population growth by age-group is generally accepted to be a fundamental improvement over classical inquiry because people’s economic roles and contributions vary by age: the young are net consumers and beneficiaries of human capital investments, adults are net producers and savers, and the old are (at least in theory or to a greater degree than adults) net consumers. Thus the economic consequences of rapid growth in the population size of the young and the elderly could potentially have a depressing impact on growth, while rapid growth in the population size of adults could stimulate growth. The demographic transition brings with it a three stage process in which a baby boom cohort moves through the population’s age pyramid. The life cycle of this cohort creates a first stage in which there is rapid growth in youth population, then a second stage in which there is rapid growth in the adult population, and finally a third stage in which there is rapid growth in the elderly population. The first and third stages can be thought of as the challenging stages since economies must confront the challenge of providing for large dependent populations. However, the second stage can be thought of as a demographic gift or dividend stage since growth in the productive adult population can potentially boost economic growth. The traditional mechanisms for the demographic dividend include the impact of the boom cohort on labor supply, savings, and human capital. However, it seems to us that there has been no research on the potential impact of age structure on technological progress, which is unusual since all standard accounts of economic growth hold that in the long run, it is technological progress that is the sole source of improvement in living standards. Demographic impacts on technology could well dwarf the importance of everything else. There are two competing hypotheses regarding demographic processes and technological progress. One holds that a rapidly growing adult population stimulates technological progress, while the other holds that it retards it. Analyzing cross-country macro data from developing countries for the period 1970 to 2000, we find that entry of the baby boom cohort into the adult stage is correlated with higher labor productivity, even after controlling for capital accumulation and past productivity. Our evidence supports the view that the demographic dividend includes positive impacts on technological progress, which may in the long-run prove more consequential than any other demographic dividend consequences.age structure; productivity growth; demographic transition

The Effect of Health on Economic Growth: Theory and Evidence

Macroeconomists acknowledge the contribution of human capital to economic growth, but their empirical studies define human capital solely in terms of schooling. In this paper, we extend production function models of economic growth to account for two additional variables that microeconomists have identified as fundamental components of human capital: work experience and health. Our main result is that good health has a positive, sizable, and statistically significant effect on aggregate output. We find little variation across countries in average work experience, thus differentials in work experience account for little variation in rates of economic growth. Finally, we find that the effects of average schooling on national output are consistent with microeconomic estimates of the effects of individual schooling on earnings, suggesting that education creates no discernible externalities.

Technological Diffusion, Conditional Convergence, and Economic Growth

Technological diffusion implies a form of 'conditional convergence' as lagging countries catch up with technological leaders. We find strong evidence of technological diffusion but not full convergence; differences in total factor productivity (TFP) persist even in the long run due to differences in geography and institutions. TFP differentials explain a large part of cross-country income differences in our model; our estimates of the rate of return to capital, labor and schooling are completely consistent with micro-economic studies, implying the absence of externalities in aggregate production.

Economic Growth and the Demographic Transition

For decades, economists and social thinkers have debated the influence of population change on economic growth. Three alternative positions define this debate: that population growth restricts, promotes, or is independent of economic growth. Proponents of each explanation can find evidence to support their cases. All of these explanations, however, focus on population size and growth. In recent years, however, the debate has under-emphasized a critical issue, the age structure of the population (that is, the way in which the population is distributed across different age groups), which can change dramatically as the population grows. Because people's economic behavior varies at different stages of life, changes in a country's age structure can have significant effects on its economic performance. Nations with a high proportion of children are likely to devote a high proportion of resources to their care, which tends to depress the pace of economic growth. By contrast, if most of a nation's population falls within the working ages, the added productivity of this group can produce a 'demographic dividend' of economic growth, assuming that policies to take advantage of this are in place. In fact, the combined effect of this large working-age population and health, family, labor, financial, and human capital policies can create virtuous cycles of wealth creation. And if a large proportion of a nation's population consists of the elderly, the effects can be similar to those of a very young population. A large share of resources is needed by a relatively less productive segment of the population, which likewise can inhibit economic growth. After tracing the history of theories of the effects of population growth, this report reviews evidence on the relevance of changes in age structure for economic growth. It also examines the relationship between population change and economic development in particular regions of the world: East Asia; Japan; OECD, North America and Western Europe; South-central and Southeast Asia; Latin America; Middle East and North Africa; Sub-Saharan Africa; and Eastern Europe and the former Soviet Union. Finally, it discusses the key policy variables that, combined with reduced fertility and increases in the working-age population, have contributed to economic growth in some areas of the developing world.

The Wealth of Nations: Fundamental Forces Versus Poverty Traps

We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year- round, rainfall.

Economic security arrangements in the context of population ageing in India

The rapid ageing of India's population, in conjunction with migration out of rural areas and the continued concentration of the working population in the informal sector, has highlighted the need for better economic security arrangements for the elderly. Traditional family ties that have been key to ensuring a modicum of such security are beginning to fray, and increased longevity is making care of the elderly more expensive. As a result, the elderly are at increased risk of being poor or falling into poverty. In parallel with its efforts to address this issue, the Government of India and some of the Indian states have initiated an array of programmes for providing some level of access to health care or health insurance to the great majority of Indians who lack sufficient access. Formal-sector workers have greater social security than those in the informal sector, but they only represent a small share of the workforce. Women are particularly vulnerable to economic insecurity. India's experience offers some lessons for other countries. Although there is space for private initiatives in the social security arena, it is clear that most such efforts will need to be tax-financed. The role that private providers can play is substantial, even when most funding comes from public sources, but such activity will face greater challenges as more individuals seek benefits. India has also shown that implementation can often be carried out well by states using central government funds, with a set of advantages and disadvantages that such decentralization brings. Finally, India's experience with implementation can offer guidance on issues such as targeting, the use of information technology in social security systems, and human resource management.old age risk, old age benefit, medical care, social security administration, demographic aspect, India

© notice, is given to the source. The Wealth of Nations: Fundamental Forces Versus Poverty Traps

JEL No. O1 We test the view the large differences in income levels we see across the world are due to differences in underlying characteristics, i.e. fundamental forces, against the alternative that there are poverty traps. Taking geographical variables as fundamental characteristics, we find that we can reject fundamental forces in favor of a poverty trap model with high and low level equilibria. The high level equilibrium state is found to be the same for all countries while income in the low level equilibrium, and the probability of being in the high level equilibrium, are greater in cool, coastal countries with high, year-round, rainfall