POPULATION GROWTH AND THE CONSTRAINT OF NATURAL

RESOURCES

Submitted by : Tessy Varkey Tirthankar Sarkar & Ujjwala Chaurasia

 METHEDOLOGY
POPULATION ●
HISTORICAL CHANGES IN WORLD POPULATION
GROWTH IN ●
DEMOGRAPHIC TRANSITION
ECONOMIC ●
THE CASE OF INDIA
DEVELOPMENT

ECONOMIC THEORIES ●
THE MALTHUS MODEL
OF POPULATION ●
THE HOUSEHOLD UTILITY
GROWTH MAXIMISATION MODEL

THEORIES OF ●
FROM MALTHUS TO CLUB OF ROME
RESOURCE
CONSTRAINT ON
●
THE RICARDO MODEL
ECONOMIC GROWTH
●
THE DUAL ECONOMY MODEL
 Population Growth in Economic Development

DEVELOPED ECONOMIES

Major ENDOGENOUS
acceleration in Average phenomenon
Increased
Employment and
Population induced by Income supported
Growth rates 1% per accelerated by major
relative to Pre- Economic productivity
modern rates. year growth growth
 Historical changes in World Population 1000-2050

YEAR TOTAL DEVELOPED DEVELOPING

1000 28 6 (21) 22(79)
1750 73 16(22) 57(78)
1800 91 22(24) 69(76)
1850 117 33(28) 84(72)
1900 161 57(35) 104(65)
1930 202 79(39) 123(61)
1960 301 107(36) 194(64)
1980 445 133(30) 312(70)
1995 569 153(27) 416(73)
2025 845 183(22) 662(78)
2050 937 188(20) 749(80)
Historical changes in Growth rates in World Population (1700-2050)

YEAR TOTAL DEVELOPED DEVELOPING

1000-1750 0.13 0.13 0.13
1750-1800 0.44 0.64 0.38
1800-1850 0.50 0.81 0.39
1850-1900 0.64 1.10 0.43
1900-1930 0.76 1.09 0.56
1930-1960 1.34 1.02 1.53
1960-1980 1.93 1.09 2.26
1980-1995 1.64 0.94 1.93
1995-2025 1.16 0.60 1.42
2025-2050 0.63 0.11 0.75
Current World Population Growth Rate
 Demographic Transition Model
The demographic transition (DT) is a model used to represent the transition from high birth and
death rates to low birth and death rates as a country develops from a pre-industrial to an
industrialized economic system. The theory is based on an interpretation of demographic history
developed in 1929 by the American demographer Warren Thompson.

Total population
Birth rate
BIRTHS AND DEATHS PER 1000 PER YEAR

Death rate NATURAL RATE OF

NATURAL POPULATION
INCREASE GROWTH (NR)=
BIRTH RATE (BR) –
DEATH RATE (DR)

Stage 1 Stage 2 Stage 3 Stage 4

 Demographic Transition Model in Britain
BIRTH RATE POPULATION

DEATH RATE
NATURAL
INCREASE

PHASE 1 PHASE 3 PHASE 4

PHASE 2

1750 70 90 1810 30 50 70 90 1910 30 50 70

MANY CHILDREN NEEDED FOR FARMING. MANY

CHILDREN DIE AT EARLY AGE. RELIGIOUS/SOCIAL
ENCOURAGEMENT. NO FAMILY PLANNING
World Age Structure Database
 P O P U L A T IO N G R O W T H R A T E
Demographic Transition Model - India

P O P U L A T IO N O F IN D IA
BIRTH AND DEATH RATE IN INDIA
60 PHASE I PHASE 2/3
50
RATE PER 1000 POPULATION

BIRTH RATE

1400 2.5
40 Rural (29)
DEATH RATE National (28) 1200 2
Urban (22)
30 1000
1.5
Rural (10) 800
20 National (9)
600
1
Urban (7)
0.5
400
10
200 0

0 0 -0.5
190119111921193119411951196119711981199120012011

•PHASE 1- 1920 TO 1960

• Precipitous drop in death rate- decrease in death rate by more than 20 per
1000 within 40 years larger than the decrease for the entire period (over
150 yrs) of British Demographic transition
•Phase 2 – not observable
•Fairly Representative of Developing Economies (except China)

The probability of low-income economies to escape from the strong pressure of exogenously given
population growth appears to be relatively slim within the next couple of decades.
 DEVELOPED ECONOMY

DEVELOPING ECONOMY
THE MALTHUSIAN MODEL

(N´/N)
Population Growth Rate

G Thomas Robert Malthus

(1766-1834) British scholar
Influential in Political
Economy and Demography
O H (W)
W´
Wage Rate N – Population
G’ N’ – Absolute increase in Population
W – Wage Rate
- Subsistence wage rate
 POPULATION GROWTH AND CARRYING CAPACITY

Starvation
Disease
Pollution
Resource depletion
Population in billion

ot
ho
cr
8 as
ers
h
ov

7 Carrying capacity

6
5
4

1980 2000 2020 2040 2060 2080

THEORIES OF RESOURCE CONSTRAINT ON ECONOMIC GROWTH

Malthus To The Club of ROME

Reappearance of Malthusian concept in Dennis L. Meadows’ -

--The Limits to growth,

• Concerning Population-Food crisis.

• Crisis of Natural resources.
• Environmental degradation due to over exploitation & waste
of resources.

# World population curtailed due to increase in death rate

due to food shortage and environmental pollution
THEORIES OF RESOURCE CONSTRAINT ON ECONOMIC GROWTH

Malthusian Crisis proved

1973 – World Food Crisis. (Due to world scale crop failure)

1974 – Oil Crisis by OPEC Embargo

Result > High increase in food and energy price.

Extract

•Public Awareness to the need and conservation of the

environment and its natural resources.

•It is evident that simple extrapolation from past trends will

produce future prediction, but the will deviate widely from actual
outcome.
DAVID RICARDO (1772 – 1823)

• He Clarified The Mechanism On How The Economic

Growth Is Constrained By Natural Resources ,By Building
The Genuine Theory Of Economic Development.

• His Main Economic Ideas Are Contained In

Principles Of Political Economy And Taxation (1817). This
Set Out A Series Of Theories Which Would Later Become
Theoretical Underpinnings Of Both Marx's Das Kapital And
Marshallian Economics.

• His theory came into picture , towards the complication

of industrial revolution in England, this was the time when
the population was highest.
RICARDO MODEL
• Identified The Capital Accumulation In Modern Industries,
Emerged From Industrial Revolution Where Economic
Growth Was Main Factor.

Concept
CAPITAL WAGE FUND

(sum of payments to labour in

advance of commodities
+
payments for the tools)

• Demand of labour = wage rate

• supply of labour = population

• he termed this phenonemon as “short run” – it is
the period where population is constant.
 CONCEPT
PRODUCT MARKET FOR INDUSTRY
C1 = LABOUR CAPITAL – sum of
payments to labour in advance of sale
of commodities produced by the labour
applied.

C2 = payments for the purchase of tools

WAGE and structures complimentary to the
RATE use of labour.
C1
C1
•Assuming in the short run supply of
C2
C2 labour remains constant.
• As a result of increased capital,
labour demand increases and wage
rate increases.
• This result in in-migration and the
PRODUCT
PRODUCT supply of labour increases.
• The increase in population results in
the adjustment of the wage rate to the
previous level.
PROFIT
PROFIT
 CONCEPT
A1 - most fertile land
PRODUCT MARKET FOR AGRICULTURE
A2 - 2nd grade land.

A3 - 3rd grade land.

A4 - 4th grade land.

•At first the food requirement of the

settlement is fully served by A1.
A1 A2
A2
• As the population increases
corresponding to the increase in the
A3
A4 A4
A3 industrial labour force , the less fertile
land i.e. A2,A3,A4 have to be gradually
put to use.
• This increases the cost of cultivation
and increases the food price.
• Thus the subsistence wage rate
increases .
 THE RICARDO MODEL OF ECONOMIC DEVELOPMENT
•SS– Short run labour supply
(W) SS • LS – subsistence wage

•DD– labour demand curve

D
•W– present wage rate
G
W’ •WS– modified wage rate
WS E
• As the labour demand increases
WAGE RATE

profit with the accumulation of capital,

W LS
A B C wage rate tends to reach a higher
Total level.
D1 D2
wages
D0 (K1)
• This results in inmigration and
(K2)
given (K0) labour supply increases to L1 & L2 .

0 (L0) (L1) (L2)

(L) • As a result wage rate adjusts itself
and reaches the subsistence level.
EMPLOYMENT
• If the subsistence wage rate
PRODUCT MARKET FOR INDUSTRY increases as a result of limited natura
resources to W’ then the profit starts
decreasing.
 THE RICARDO MODEL OF ECONOMIC DEVELOPMENT
•HS is the supply schedule of
(P)
corn determined by its marginal
cost.
•D0D0 represents the corn
HS demand curve corresponding to
the labour force L0 (in the
previous graph), D1D1 to that of
D2
CORN PRICE

D1 L1 and so on.
D0
P2 C •As the population increases to
L2 and demand for corn
P0 WS increases to D2D2, the second
D0 D2
grade of land needs to be
D1
(N0) (N1) (N2) utilised. It increases the
0 (Q)
Q1 Q2 marginal cost of production and
in turn increases the corn price.
CORN OUTPUT/ CONSUMPTION
•This effects in the increase of
PRODUCT MARKET FOR AGRICULTURE subistence wage rate in the
industrial sector.
 SUMMARY
• The theory predicts that , under given natural resources
endowments in terms of fixed land areas by grade, food
prices increases resulting from population growth.

•This will drive the economy into “stationary state”

where the rate of profit is so low that it provides no
incentive for additional investment and labourers’ real
wage rates do not diverge from a subsistence minimum.

•Landlords alone receive enlarged rent revenue..

•This mechanism of fixed land resource endowments that

constrain economic growth in early stage of industrialization
is called as “Ricardian trap”
 CONSEQUENCES
For rescuing the British economy from the Ricardian trap ,
Ricardo proposed liberalization of grain imports.
• repeal of corn laws .
• removes tariff barriers.
• cheap import of food grains.
• food prices become low.

Ricardo model sets out clearly the problem of natural

resources constraints that low income economies will have to
face when they undergo industrial development when
agriculture is stagnant.

In modern context ,for low income economies:

• Not possible to solve this problem by liberalization
of food imports alone.
• The option is to advance agricultural technology
concurrently with industrialization..
THE DUAL ECONOMY MODEL

• W. Arthur Lewis (1954) –built upon the thrust

of the Ricardo model, a new 2-sector model .

• The Dual Sector model, or the Lewis model,

is a model in Development economics that
explains the growth of a developing economy
in terms of a labour transition between two
sectors, a traditional agricultural sector and a
modern industrial sector.

•It is a theory of development in which surplus

labor from traditional agricultural sector is
transferred to the modern industrial sector whose
growth over time absorbs the surplus labor,
promotes industrialization.
 CONCEPT
• The traditional agricultural sector -- characterized by low wages, an abundance
of labour, and low productivity through a labour intensive production process .

• In contrast, the modern manufacturing sector is defined by higher wage rates than
the agricultural sector, higher marginal productivity, and a demand for more workers
initially.
• The agricultural sector has a quantity of farm workers that are not contributing to
agricultural output . This group of farmers is termed surplus labour since they could
be moved to another sector with no effect on agricultural output.

• Due to the wage differential between the 2 sectors, workers will tend to transition
from the agricultural to the manufacturing sector over time to reap the reward of
higher wages.
• The end result of this transition process is that the agricultural wage equals the
manufacturing wage, the agricultural marginal product of labour equals the
manufacturing marginal product of labour, and no further manufacturing sector
enlargement takes place as workers no longer have a monetary incentive to
transition..
 O1-O2 -- Industrial labour
SL’ O2-O1 -- Agricultural labour
INDUSTRIAL WAGE RATE

D1 SL
•S -- Shortage point
D0 G
•At S, the whole surplus labour
from agriculture has been
H
migrated to industry.
•The agricultural output
decreases and the subsistence
O2 wage level of industrial labour
O1 S T W’
starts increasing.

AGRICULTURAL OUTPUT
W’ •T – Turning point
•From T, the agricultural wage
rate starts increasing from W’.
•Before reaching point T the
industrial profit becomes so
R low that the capital
accumulation stops.
 CONCLUSION
• Contribution of agriculture has significant role in developing
industrialization.

• The successful industrialization cannot be expected without the efforts

of increasing food production to avoid the danger of being caught in the
Ricardian trap..

• Contribution of agriculture to industrialization is not only supply of

labour or food product but also providing platform for industrial
commodities, earning of foreign exchange through export of agriculture
product .

• Industrialization & modern economic growth can hardly be successful

without healthy development in agriculture sector.
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