Population Growth and Economic Development Policy Questions (1986) / Chapter Skim
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4 Will slower population growth lead to more capital per worker, thereby increasing per worker output and consumption?
4 Will slower population growth lead to more capital per worker, thereby increasing per worker output and consumption?
Pages 40-46
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From page 40... ...
usefulness in production, often referred to as 'human capital." When production processes exhibit constant returns to scale, in He sense that increasing all inputs by a given proportion increases total output in just that proportion, the average productivity of each worker depends on his or her human capital and the average amount of other factors with which he or she works, but not on the number of workers or the overall amount of any other factor. In this situation, when more of any single factor is used, total production increases but the average output per unit of Be increased factor declines, while the average productivity of all other factors increases.
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From page 41... ...
demographic investment equal to about 9 percent of total annual output. Demographic investment generally forms a far higher proportion of total investment in developing counties than in developed counties because of Heir more rapid population growth rates and frequently lower rates of savings, although there is much intercount~y variation (World Bank, 1974~.
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From page 42... ...
However, if rates of net investment and technological progress are unchanged, it does suggest that more rapid population growth rates will lead to less capital per worker, thereby depressing Me level of per capita income. The magnitude of this effect can be easily calculated: per capita income in a population "Towing at 3 percent per year would be only 13 percent lower than in one growing at 1 percent per year.
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From page 43... ...
gross national product (GNP) to such expenditures in countries whose populations have younger age distributions or more rapid growth rates (see, e.g., Schultz, 1985~.
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From page 44... ...
In a more carefully derived model, Mason (1985) found negative effects of dependency on savings and positive effects of population growth rates on savings, with the net effect of higher fertility being positive when He growth rate of per capita income is zero and negative when it is as high as 4 percent, win a nonmonotonic relationship in the middle range.
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From page 45... ...
Population growth tends to raise returns to land and to capital, and recipients of such income are believed to be wealthier and to have higher savings rates than recipients of labor income. This tendency suggests that if slower population growth boosts wages and decreases rents and profits, the result may be a lower aggregate savings rate.
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From page 46... ...
Second, slower population growth could change the rate of saving and investment and thereby change the growth rate of physical capital. While the direction of this effect is indeterminate, there is no evidence to suggest that slower population grown would significantly decrease the savings rate, and some evidence actually suggests a positive effect.
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