Professor Debraj Ray NYU Abu Dhabi, 1405 Sama Office Hours: 1413A Sama M4-5.30 pm, W 10.30 am ~ 12 noon ‘email: debraj.rayGinyu.edu, homepage: http:/ /www-econ.nyu.edu/user/debraj/ ECON-AD 300 Development Economics Outline of Answers to Problem Set 6 (1) [E] Review the concepts of birth rates, death rates, and age distributions, and the way in which these notions interact with one another. Construct an example of countries A and B. where A has higher death rates than B in every age category, yet: has an overall lower death rate. For concept review, see class notes and text. Here is the example that the question asks for Consider the following hypothetical table, which shows death rates per thousand in different age groups, as well as the percentage of the population in each of the age groups, for two different countries A and B. % Population in age-group Death Rates in age-group Country 1515-64 Gt 15 15-64 44 A HBB 3 10 8 50 B 9 oT uo7 4 40 In thus hypothetical example, country A bas higher death rates in every category compared to country B. Let us calculate the overall death rates, which are given by a weighted average of the age-specific death rates, using population shares as weights,. For A it is eee 10 timo typ = 5 per thousand. For B it is 7 19 4 45t 4 att — 9.01 00 * “too * “700 per thousand. So country A has death rates that are lower overall. (2) Why does a young age distribution make it more difficult for a country to slow its rate of population growth? Tf a country suddenly drops its total fertility rate to two (which makes for a stationary long-run population), describe the path that population will take before settling at this long-run level. ‘This was discussed in class in detail (under the heading of macro-inertia, Because of the younger population composition, a proportionately larger fraction of the population are on the threshold of marriage and reproduction. Thus, even if one were to reduce the fertility rate per couple (or per woman), the fraction of couples in the reproductive period is still very high. ‘This means that the overall birth rate is high even though the fertility rate might be 12 The same argument shows that even when the fertility rate is dramatically reduced to steady state levels (which is 2 per couple, not surprisingly), or even below this level, the population still continues to grow for a while. This is becanse the percentage of couples who are having, children is very high, so that they add more children to the population than individuals who are removed by death, This effect will slowly disappear as the reduced fertility rate finally has an effect on the age distribution, but this will take some decades, (3) [F] Bvery country might want to take a pro-natalist stand for military or political rea~ sons, but the combination of all countries taking the same pro-natalist stanice may anake all ‘countries worse off relative to a neutral stance on population. Some General Comments. ‘To understand this, consider an example. Suppose that there are only two countries in the world, and each have an ideal population of 1 million (leaving ‘out any miltaristic or international political goals). Now stippose that the government wants to encourage additions to this ideal population simply because of political reasons. How are these political gains to be measured? Well, they would be measured by the difference between the populations of the two countries, rather than the absolute levels of population. But these extra populations come at a cost to each of the countries (because they will depart from the ideal population size of one million), Now if the two countries are identical, th vill both encourage similar populations in excess of one million (think of this as an arms race or an advertising race). In the end, there will be very little population difference between them so that they are both locked into a Prisoners’ Dilemma, No single country will want to unilaterally revert to its ideal population size (because then a negative population gap will ‘open up between it and its rival), but a joint bilateral policy of population reduction will benefit both countries, The particular problem that follows tries to construct another specific instance of the Pris- ‘oners' Dilemma that results. Say that, the net cost to a country of having population n is given by the cost function e(n) = n2, (I want you to think of this as excess population over and above some optimal number that I am setting to zero, for simplicity.) But a large country is more powerful at seizing global power. Suppose that there is “one unit” of global power to be seized, and it, is divided among two countries. Then the net payoff of country i in a two-country world is given by mae mtr" where i= 1,2. (a) Compute a “reaction fumetion” that deseribes the choice of m1, given ny. Note that 2 has a similar reaction function. Convince yourself that the intersection of the two reaction functions describes a “population equilibrium”. Can you calculate this equilibrium? Suppose that country 2 chooses a popu its net payoff lation of ng. Then country 1 will choose: to maxi m 2 mem"‘Take derivatives with respect to n; to write down the first order condition: 1 ma mom (+m Rearranging terms a little bit, we get mm m +12 (ny + m2) n” of country 1. By exactly the same, symmetric ealeulation, it 2nd. This is the “renetion funy must be the case that fies sft mm + na (ma + 2) But the left hand sides of these two reaction functions are the same (they are the product of population shares of the two countries), so it must be the case that the right-hand sides ‘are equal as well, which proves that my = m2, Substituting this common value — call it n into any one of the reaction funetions, we see that, i qo", which shows that each country choose a population of 1/ VB (don’t be shocked by the fraction as a solution for population: we can easily get more realistic numbers by just adjusting the scale of the original problem, or think of this in units of a billion, say). ond, (b) Prove that if both countries could equally scale back their population they would both ‘be better off, But if that is the case, and they are maximizing their net payoffs anyway, why is the equilibrium outcome inefficient? This is easy. Note that in equilibrium, the net payoff to each of the countries is where 1 is the solution in the previous part. Now observe that if the two countries could coordinate to lower their population numbers in a symmetric way, the payoffs to each goes up. *Taesisiy pis wey TERE ee aac ap a ROMA RE a Count off no matter hoxe much they reduce their populations, as long as they do so symmetrically That is obviously unrealistic. We could hive amended the problem exsily by giving each conntry an intrinsic value to poptilation np to a point, sich as the modified payol fmction ni SO) + a ‘whore f{(n) is some inverted-U function capturing the intrinsic value of poptilation. Nove the solution will be harder to compute but will still have aspects of the Prisoners’ Dilemma that we have revealed above in extremely stark form, (4) [E] You are gathering demographic data in a village. You suspect that families use “male targets”; that is, they have children until a son is born, but you don’t have direct evidence of this, All you have is information on the sex and birth order of each child born to each family in the village.4 Suppose that the chances that auy child is a boy is 50-50, and also assume that all children survive, Ifa fraction m of the population use a one-son target rule and the remaining fraction 1 =m have a random number of children (anywhere between 1 and 4), calculate the hoy-girl ratio among last-borns at each birtheorder (#1-#4), Can you use these numbers to provide a test of the targeting hypothesis? Discuss. Let’s look at last-borns of birth-order ¢, where ¢ € {1,2,3,4}. As far as the “non-targeting” population of 1 —7m houscholds is concerned, 1/4 of them will have last-borns of this order, so there are (1 — m)/4 families in this category from the now-targeting segment. As for the targeting segiment, we will need children 1,...,t—1 to be girls and the last child at t to be a boy for them to stop precisely at ¢. The probability of that is (1/2), so a fraction (1/2)! of targeting families will stop here, and all of them will have had boys. Therefore the overall share of boys among last-borns of birth-order ¢ is a weighted average of boys among the two populations: (1/2)[(m ~ 1)/4] + (1/2)* [im = DA} 072" It is easy to see that this share of boys is a declining function of birth-order. ‘That forms the basis of a test. Ina world in which there are no targeters, the share of boys among last-borns should be 50-50 regardless of birth-order; now they are higher than 50-50 at every order. But of couse, if there is a zero non-targeting population, then the share of boys among last-borns should be 100%, The intermediate solution here should help us identify rm, (5) In several countries, there appears to be evidence for a severe “gender bias”: more males in the population than there “should be” in certain age or disease categories. This question tries to explain how the mubers are computed. Here are death rates from eardiovaseular disease for men and women in two countries A and B. For country A it is 10 per thousand for men and 8 per thousand for women. In country B it is 20 per thousand for men and 19 per thousand for women. There are 20 million women in country B. (a) We want to find the number of “tnissing women” in country B (relative to A) from cardiovascular disease. ‘To do this, first answer the question: what would be the death rate of ‘women in country B if they had the same relative death rate to men as they do in country 4”? The “unbiased” death rate for women, up, in country B is given by the solution to the ‘equation ty _ du A) dn(B) — dm(A)" the idea being that: we allow for overall death rates to be different but insist that at the benchmark, the relative death rates for either gender should be the same. Thus we have te _ 8 20) ~ 10° OF ty = 16.