Population and Development Economic Perspective

Ernesto M. Pernia UP School of Economics

Mulat Pinoy
28 August 2010
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Outline
• Introduction • Negative externalities of rapid population growth • Macro perspective • Micro perspective • Food & fuel shortages • Tale of diverging twins • Conclusion: Daunting challenges for PNoy
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Population issue remains contentious
• Majority of Filipinos regard rapid population growth as hindrance to development, requiring policy intervention. • But government appears immobilized owing to opposition from Catholic Church hierarchy and other conservative groups. • Yet the influence of the Church on fate of political leaders seems overrated. • Hard Church and soft State at the root of RP’s inability to achieve demographic transition cum economic development.

Population issue remains …
• Reality is that a well-organized, singleissue vocal opposition is tamping the silent majority. • Filipinos typically don’t want to talk openly about sex which intimately relates to the population issue. • Thus, parents try to maintain “reticent dignity” vis-a-vis their kids’ sexuality even if they don’t want them involved in pre-marital pregnancy, so they can finish their education!

Population issue remains …
• The “squeaky wheel” phenomenon. • Isn’t the State to blame, even more so than the Church, for not addressing the population issue? • In other Catholic countries, the State has not allowed itself to be kept hostage by the Church. • Little wonder, RP has a hard population and a soft economy!

Negative externalities of rapid population growth (RPG)
• Economic growth: RPG constrains investments in physical and human capital  low productivity, hence, social cost of slow economic growth & poverty reduction. • Environment: RPG strains the environment, incl. sources (forests, water) and sinks (air that’s polluted)  climate change, though developed countries contribute much more to global climate change.

Negative externalities (cont’d)
• Poverty and inequality: RPG raises supply of labor relative to land and physical capital  lower wages (esp. for less skilled), hence, greater inequality and poverty. • In RP, poorest quintile increases close to double the overall average growth rate. • Inequality adversely affects economic growth directly.

Macro perspective: population, economic growth, and poverty
• In 1970s-80s, population growth of 2%+ in poor countries was already considered high & hindrance to economic growth via low human capital investment, unfavorable saving and capital-shallowing effects, etc. • Echoed by a recent studies (e.g., Mapa 2006) that highlights the “demographic dividend” from demographic transition, with work force rising faster than dependents. • Demographic transition must be early and quick to result in significant dividends (higher saving rate, HRD, productivity, etc.) – an opportunity RP has sadly missed.

Table B: Population and Poverty Statistics – Selected Asian Countries
Population Poverty % below poverty line % share of ca. 2004 the poorest quintile in national PPP National income or $/day 2004 consumption 2004 2004 40.0 5 36.3
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Annual growth rate (%) 2005-2007

Total fertility rate 2006

Bangladesh

1.3

2.9

8.6 5

Indonesia
Malaysia Nepal Pakistan Philippines Thailand Vietnam

1.1
2.0 2.2 2.0 2.1 1 0.7 2.0

2.2
2.7 3.4 3.6 3.3 1.8 2.2

16.6 7
5.1 2 30.9 23.9 33.0 6 9.8 2 19.5

7.7 2
0.0 24.7 3 9.8 13.2 3 0.0 2 8.4

8.4 2
6.1 6.0 9.2 5.5 3 6.4 2 7.2

Micro Perspective Fertility and poverty
• Consistent and tight link between fertility and poverty. • Family size also directly related to likelihood of falling into poverty owing to exogenous shocks (e.g., typhoons, droughts, inflation). • Mean per capita income, expenditure and savings fall monotonically as family size rises. • Likewise, mean education spending per student and mean health spending per capita.

Family Size and Poverty
Large family size closely associated with higher poverty; be it incidence, gap or severity. This has not changed in the last 21 years; if at all incidence among those with smaller family size has gone down while for those with large family size has gone up.

Family size and provisions for current and future needs
As family size rises, families are not able to maintain per capita income, per capita expenditure, per capita savings, per capita health expenditure, and per student education expenditure. Less able to provide for current needs Less able to protect against income shocks Less able to invest in human capital or poorer income prospects for their children.

Family size and hunger
• Strong association between family size (FS) and poverty further substantiated by link beween FS and hunger (Mangahas
2009).

• Hunger rates tend to rise monotonically with number of family members, especially for severe hunger. • Average hunger incidence for RP is about the rate for families of 5-6 members.

Table E. Hunger Incidence by Number of Family Members Family members Total hungry (number) (%) Philippines 1-2 3-4 5-6 7-8 9+ 18.4 10.0 17.6 18.5 23.9 25.2 Moderately hungry (%) 15.2 8.0 15.5 15.4 18.5 17.9 Severely hungry (%) 3.2 2.0 2.1 3.1 5.4 7.3

Source: Mangahas (2009) based on SWS September 2008 Survey.

Food-fuel shortages
• Both a supply-side and a demandside problem. • Agricultural production neglected for years (irrigation, farm-to-market roads, technology, post-harvest facilities, etc.). • Slow moves in oil & gas exploration (e.g., Malampaya & Galoc) & alternative fuels (consider Brazil’s foresight!) • No demand-side management (population policy and FP programs).
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Bigger bang per buck
• In 60s & 70s, studies showing that investment in FP to avert (unwanted) pregnancies gives higher return  higher income per capita – vis-à-vis investment in physical infrastructure. • Many LDCs, including RP, took the message to heart. • RP among the first to initiate population policy and FP in 1969.

RP’s policy failure
• Unfortunately, RP failed to sustain what it started. • By contrast, Thailand followed RP’s lead later in the 70s and sustained the effort with vigor.

A tale of diverging twins
• In 1970, RP’s population was 36.7m and Thailand’s about the same. • Population growth rate also about 3% per annum for both twins. • By 2008, RP’s growth rate reported as 2.04%, while Thailand’s at 0.7%. • In 2010, Filipinos number 94m, while Thais about 67m – the difference about Malaysia’s population!

RP’s rice shortage
• If RP had sustained its population policy and FP programs as did Thailand, annual rice consumption only about 13m metric tons instead of 18m m.t. • At 16m m.t. domestic production, RP a net exporter of 3m m.t. • A conservative estimate because savings from lower spending on public services could have been used to boost productivity.

Income and poverty
• Moreover, at Thailand’s population growth trajectory, RP’s income p.c. would have been markedly higher, poverty & unemployment rates lower. • Again, pure demographic effects. • Does not allow for favorable feedback effects in terms of higher saving, investment and productivity.

Daunting challenges for PNoy
• • • • Sustained political stability Improved governance  curb corruption Fiscal responsibility Better investment climate  infrastructure and regulatory system • Higher investments in human capital (education, health & nutrition) • Raise investment in S&T (from 0.15% to 1.0% of GDP)
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RP’s daunting challenges
• Review labor export policy  serious policy reforms to strengthen economy • Food security • Energy sufficiency • Eco-tourism (open skies policy) • Reduce population growth rate – demand management  unambiguous population policy • Poverty reduction  quality of life
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Thank you!

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