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Introduction BACKGROUND In 1984 there were approximately 3.6 billion people living in the developing regions of the world, conventionally defined as comprising Africa, Latin America, and Asia except Japan. This number was growing annually at a rate of about 2.0 percent (United Nations, 1984:101~. For every 1,000 persons, there were 31.2 births and 11.0 deaths. Under estimated rates of childbearing in 1980-1985, each woman in developing countries would bear an average of 4.1 children if she survived to the end of her reproductive years. Based on age-specific mortality rates in 198~1985, a newborn could expect to live 56.6 years (United Nations, 1985:144~. These numbers represent a substantial change in demographic conditions during Me postwar period. In 1950 there were only 1.7 billion people living in the developing counties. Under 1950-1955 rates, women were Bering an average of 6.2 children, and newborns could expect to live only 41.0 years (United Nations, 1985:144~. There were 45.4 births and 24.4 deaths annually per 1,000 persons. The only important similarity to the situation three decades later was the rate of population growth: 2.1 percent annually in 195~1955, and 2.0 percent in 1980-1985. However, there was a rise to an annual rate of 2.55 percent in 1965-1970 and a subsequent decline. This hill-shaped pattern of population growth rates is not so pronounced if China is excluded from the calculations: without China, annual grown rates for the less-developed counties were 2.1 percent in 1950-1955, 2.5 percent in 1965-1970, and 2.4

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2 POPUI~rlON GROWTH AND ECONOMIC DEVELOPMENT percent in 1980-1984. Recent demographic estimates for major areas of the developing world are presented in Table 1. Sustained population grown rates of this magnitude are unprecedented in history and reflect above all human success in reducing the burden of premature and avoidable death in developing countries. The growth rates are nearly twice those in industrialized areas of Europe during the nineteenth century. Despite being indicators of success, the high rates of population growth in developing countries during He postwar period have caused concem, and the focus of attention has been on the social and economic costs of high levels of fertility. To many observers, these costs have appeared obvious. The earls resources are finite, and more people by definition means fewer natural resources per person. Of course, die most important resources are not natural, but artificial (plants and equipment used in production, openings in school systems, jobs, social institutions, and economic infrastructures and so are expandable. But human beings begin life with an extended period of dependency during which they contribute nothing to the production of these resources, while calling on them for sustenance and development. In the short term, at least, it appears obvious Hat all resources will be spread more thinly if there are more children. In the era of rapid population grown, the stage of childhood dependency came to be perceived as a burden with which families and societies must cope. Thus, population growth (i.e., high fertility) took its place alongside other self-evident problems such as crime, disease, illiteracy, hunger, and poverty, to be dealt with by informed social policy. Because the costs of population growth seemed self-evident, following directly from the fixity of nature and He long period required for a newly born child to become fully productive, the issue was notable subject of a gem deal of research. National policies were based on commonsense impressions; in 1952, India became the first country to initiate a family planning program. Among early studies that took a more systematic approach to population matters was a 1958 book by Ansley Coale and Edgar Hoover, Population Growth and Economic Development in Lo~v-lncome Countries, and a report and series of papers commissioned by the National Academy of Sciences (1971), Rapid Population Growth: Consequences and Policy Implications. The former focused on the effects of population growth and associated high burdens of dependency on rates of physical capital formation, using Mexico and India for illustrative purposes. The latter was perhaps most noteworthy for introducing issues relating to the effect of population growth on human capital formation, which research subsequent to Coale and Hoover's book had shown to be a major element in economic grown. Both studies concluded Hat rapid population grown had seriously negative economic consequences.

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4 POPUl^77ON GROWTH AND ECONOMIC DEVELOPMENT At one point, the Academy report argued (National Academy of Sciences, 1971, Vol. 1:29~: If the less developed regions could raise their current per capita income growth rates by one-third, it would reduce their per cotta income doubling time from somewhat over 25 yeam to 18 years. Under current circumstances this could be accomplished entirely through a fall of the average birth rate in the less developed region from their roughly 40 per 1,000 level to 30 per 1,000, a 25 percent shift, which, in addition to its income effects, could have perhaps equally large family- welfare effects not captured by conventional income measures. Elaborate but essentially mechanical modeling exercises, such as Limits to Growth (Meadows et al., 1972), which incorporated fixed factors of production and Fred absorptive capacity of Me environment in combination with projected rises in population, seemed to confirm that there was much to fear about population growth. This pessimistic view was vividly presented in the widely publicized Global ~)000 Report to the President (Council on Environmental Quality and U.S. Depan~ent of State, 1980~. But it is clear that despite rapid population grown, developing countries have achieved unprecedented levels of income per capita, literacy, and life expectancy over the past 25 years (see Table 2~. Furthermore, as recognized in the earlier Academy report, there is no statistical association between national rates of population growth and grown rates of income per capita. These observations point toward the key mediating role that human behavior and human institutions play in the relation between population grown and economic processes, a role that has been acknowledged for some time by economists and demographers (National Academy of Sciences, 1971, Vol. 1:65; Berelson, 1975:3~. For example, as easily accessible reserves of important natural resources are exhausted, the real cost of extraction, and hence the resource pnce, nses. In tum, this tends to stimulate the search for new processes that use the resource more efficiently, for improved extraction techniques, for new sources, and for less expensive substitutes. In this manner, the response of the economic system to scarcity tends to weaken the direct effect of population growth on resources. Perhaps more important, it is obvious that most parents are willing to make many of the sacrifices required to raise a child through its dependency period, so that some of the most important economic adjustments to population grown are not only automatic but even considered part of a desirable process by those who ~snder~ke them. Recognition that human inshtudons, especially the fancily, play an important role in adaptations to population grown led to considerable attention being focused on the microeconomics of household decisions regarding world, childbearing, and investments in children (e.g., Easterlin, 1980~.

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6 POPUl~7ON GROWTH AND ECONOMIC DEVELOPMENT A more provocative challenge to conventional wisdom was posed by Julian Si~non's 1981 book, The Ultimate Resource, which argued that population is an important long-term stimulus to economic advance through its effects on productive technology, the pace of innovation, Me fonnation of markets, and governmental infrastructural investments. Simon's book received a good deal of both scholarly and popular attention and has been influential in U.S. policy. The pace of research on consequences of population grown accelerated with the approach of the 1984 World Population Conference in Mexico City, held under the auspices of the United Nations. In addition, several papers on the economic consequences of population growth, including an important one by McNicoll (1984), were commissioned by the World Bank in preparation for its World Development Report special 1984 issue on population. FOCUS ON FERTILITY DECLINE AND ECONOMIC WELFARE Against this background, the National Research Council undertook an extensive effort to synthesize knowledge on the economic consequences of population grown. This volume represents a summary of much recent research on the economic consequences of population grown in developing countries, including He 17 papers commissioned by the working group on important aspects of economic-demographic relations. The report is organized in teens of the major questions around which discussion has focused. The questions are not mutually exclusive and are perhaps best evaluated in toto rather Man individually. But the subject is large, and some organizing framework is necessary. One important finding of Me report is that the evidence regarding the consequences of a change in the rate of population growth is extremely varied, some arguments coming Tom theory and some from empirical studies. Furthermore, those studies differ widely in quality and scope. Drawing fun conclusions about the overall impact of slower population growth is difficult because the research completed to date is fiequendy based on limited samples and inadequate data as well as on partial and occasionally inappropriate conceptual models and statistical techniques. Ibe scientific literature contains few adequate studies of the effects of slower population grown in developed counties and fewer still on the effects in developing countries. Consequently, Were is much less certainty than we would like about Me specific quantifiable effects of different rates of population grown on human capital fonnation, on physical capital formation in liens, on technical progress and its diffusion, and on Me numerous other questions Cat are amused in We following chapters. As in the 1971 Academy volumes, we focus on We effects of a slowing

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INTRODUC17ON 7 of a population's growth due to a policy-driven fertility decline. Although population growth depends on migration and mortality as well as fertility, for most developing countries-and surely for the developing world as a whole- there is little potential for major changes in population grown rates or sizes as a result of international migration. And certainly, reganlless of economic consequences, public policies will continue to strive for improvements in public health and access to medical care, which will result in continuing modality decreases and longer life expectancy. Hence, the greatest discretionary scope for altering population growth rates to achieve economic aims rests with fertility policy, and so we have focused on fertility in establishing a framework for considering population policy. In considering the consequences of fertility decline, we focus on measures of economic well-being or welfare. In particular, we emphasize vanaUes that are closely related to levels of per capita income, which is a widely recognized indicator of economic welfare. Such variables as capital per worker and land per person concern us mainly because they are directly linked to per capita income. However, we recognize that per capita income is not identical to well-being; individuals can often improve Heir well-being by sacrificing per capita family income for other goods such as leisure or children. While we also give some consideration to other major objects of social and economic policy-namely, the distribution of income and levels of heals and education-we were not able to consider broader measures of well- being, and we male only passing references to such development concerns as interest rates, foreign exchange regimes, or industrial structure. UNDERSTANDING THE: CONSEQUENCES OF EE:RTILIrY DECLINE Population grown and economic development are complex, interlinked processes. Each affects the other in many ways, and both are interrelated to the broad away of social and political changes that constitute modernization. Consequently, simple correlations between population grown and per capita income, although intriguing, ultimately provide little insight into the causal impact of a policy~iven decline in fertility. A scientific assessment of Hat impact requires that one identify the major mechanisms by which population grown is hypothesized to affect economic development; assess the evidence for each hypothesis; and, finally, synthesize the net effect of He simultaneous operation of these mechanisms. A starting point in this assessment is to recognize several demographic changes that follow automatically from a permanent reduction in the number of children born per woman of childbearing age if Here is no change in mortality:

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8 POP Ul'ION GROWl~l AND ECONOMIC DEVELOPMENT The population will grow more slowly than it would otherwise have grown. At every time subsequent to the fertility reduction, the population will be smaller than it would have been. At every subsequent time, the population will be less dense than it would have been (having fewer persons per square mile). At every subsequent time, the population will have an age structure that is older than it would have been. It will have a smaller proportion of children, a larger proportion of the elderly, and an older mean age. All of these short- and long-run demographic changes are in the same direction; however, the short- and long-run responses may differ in the rate of change of population growth and the age distribution. In a population with constant age-specific mortality and constant age- specific fertility that undergoes a sudden and permanent change to a lower level of age-specific fertility, all the above-mentioned effects will be observed. But eventually, after a transitional period of two to three generations (or roughly 70 years) the population will settle down to a new demographic equilibrium. The rate of growth, while lower than it would have been, will no longer be declining, and the average age of He population will have stabilized at an older mean age. Certain economic responses that may be observed during this transitional period will not continue once the new population grown pattern has been attained. But even though many economic effects occur only during this transitional period, they can result in higher or lower endowments of technology, capital, and natural resources for future generations. (If the effect of a policy-induced fertility reduction is to hasten a decline that would in any case have occurred later, the first and last effects noted above are transitory, while the second and third are still generally tine.) These demographic changes, both short and long term, are hypothesized to affect economic welfare through a variety of mechanisms, as noted above. We have identified the most important of these hypotheses and organized them as a set of questions that refer to bow transitory and permanent effects: 1. Will slower population grown increase the grown rate of per capita income through increasing per capita availability of exhaustible resources? 2. Will slower population growth increase the grown rate of per capita income through increasing per capita availability of renewable resources? 3. Will slower population growth alleviate pollution and the degradation of the natural environment? 4. Will slower population growth lead to more capital per worker, thereby increasing per worker output and consumption?

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INTRODUCTION 9 5. Do lower population densities lead to lower per capita incomes via a reduced stimulus to technological innovation and reduced exploitation of economies of scale in production and infrastructure? 6. Will slower population growth increase per capita levels of schooling and health? 7. Will slower population grown decrease the degree of inequality in the distribution of income? 8. Will slower population growth facilitate the absorption of workers into the modem economic sector and alleviate problems of urban growth? 9. Does a couple's fertility behavior impose costs on society at large? For the first eight questions, we examine both the theoretical rationale for the hypothesis and the empirical evidence that bears upon it. Because we are interested in the dynamic effects of population growth, historical and time- series data are of special interest. However, historical studies, particularly of only one country, have two possible drawbacks: first, underlying relationships may have changed over time so that the historical data are no longer relevant; second, the experience of any particular country may not be representative or generalizable. Moreover, historical information may simply be lacking. When possible, then, we also draw on recent comparisons of countries with different population sizes, densities, or grown rates. If confounding variables can be controlled, these cross-national comparisons can be interpreted as natural experiments in the effects of population variables. However, it is more difficult to control for background variables in cross-sectional than in time-series analyses. The two perspectives are therefore complementary. The final question is somewhat different in fonn from the over eight. Based primarily on theoretical arguments, it introduces the important distinction between private and social consequences of childbearing decisions. This distinction reflects differences between the childbearing costs and benefits realized by He couple making the childbearing decisions and those realized by the society at large. This question is especially important in social decision making, since the argument for social intervention in population matters is much stronger if the costs and benefits are shown to fall heavily on people not involved in childbearing decisions. While we provide a general framework for studying the population-economic interrelationship in developing countries, it must be understood that conditions vary quite dramatically from place to place. Temperate Soup America is highly urbanized and has income levels that are high by historical standards. Most people in Asia live in quite dense agrarian areas where income levels are very low. Much of Africa is also poor but has low population density and uses very different agricultural techniques Han Asia. Many Middle Eastern countries are land-poor but resource-rich with oil. The importance of these

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10 POPUL4~7ON GROWING AND ECONOMIC DEVELOPMENT and other differences emerges in our review, but it should be borne in mind throughout that we are not attempting to provide answers that pertain to all times and places. It should also be stressed that although Me future contains many features that are essentially unknowable, one pertinent feature can be seen in sharp outline and is almost certain to distinguish the future from the past: populations will be substantially larger in developing countries than ever before. According to We United Nation's medium variant projections of 1982, the population of the developing world will reach 6.8 billion by 2025 an 89 percent increase over the 1985 level. This is ensured (bamng catastrophes because of the young age structure of these populations. The population in the middle and older age groups is certain to grow even if fertility declines are rapid enough to offset the growing number of reproductive-aged persons and keep the child population from growing. Even though population grown rates are declining in many developing counties, they seem almost certain to remain high relative to growth rates in the developed countries during comparable periods of their economic history.