Chapter 1: Population Growth and Economic

Development

Harvard Kennedy School

PED 365, Spring 2011

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Plan

1 Introduction
2 The demographic transition
3 Two con‡icting views on population and development
4 From stagnation to growth

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Introduction

The world population has been growing very slowly for millennia, at
yearly growth rates lower than .1 percent until ... 1700.
Then population growth started to rise in Western Europe and its
o¤shoots in the 18th and 19th centuries, peaking around 1850 at 1
percent and then decreased to 0.5 percent nowadays. In the
developing world population growth remained low throughout the
19th century, rose sharply after 1950 to peak at 2 percent in 1970
and has since gradually decreased to about 1 percent today.
The …rst billion was reached in 1804, the second in 1927 (123 years
later), the third in 1960 (33 years), the fourth in 1974 (14 years), the
…fth in 1987 (13 years) and the sixth in 1999 (12 years). Note that the
seventh billion has not been reached yet (while 12 years have passed).
Realistic scenarios predict a stabilization by 2050 at 10 billion.

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Introduction

In this chapter we want to go beyond the description of the

demographics and analyze the relationship between population growth
and economic development: what causes what?
To answer this question we will …rst present basic demographic
concepts and historical evidence on the demographic transition.
We will then present two broad views on the links between population
growth and economic development – a pessimistic or fatalistic view
inspired by Thomas Malthus and its modern disciples (such as Paul
Ehrlich), and an optimistic view advocated by economists and
demographers such as Julian Simon, Simon Kuznets and Esther
Boserup –, and discuss the empirical evidence.

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Plan

1 Introduction
2 The demographic transition
3 Two con‡icting views on population and development
4 From stagnation to growth

(Harvard Kennedy School) Hillel Rapoport PED 365, Spring 2011 5 / 33

Basic demographic concepts

Population dynamics:

Pt +1 = Pt + Bt Dt + Mt

with
Pt = population at time t
Bt = number of births, hence the birth rate: bt = Bt /Pt
Dt = number of deaths, hence the mortality rate: dt = Dt /Pt
Mt = net migrations, hence the migration rate: mt = Mt /Pt
Growth rate of the population:

Pt +1 /Pt = 1 + nt

where nt = bt dt + mt

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The three phases of the demographic transition

First phase: for millennia, birth and deaths rates have been very high
and of similar magnitudes, yielding extremely low population growth.
Second phase: death rates started declining thanks to better health
practices and increases in agricultural and industrial productivity; with
…rst steady birth rates and then demographic inertia due to the age
structure, this caused population to explode in Europe in the 19th
century and in the developing world in the mid-20th century.
Third phase: with declining birth rates and an aging population,
birth and death rates again converge to a low-level equilibrium already
reached by developed countries while developing countries are either
in the second or at the beginning of the third phase.

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Examples of demographic transitions

The English demographic transition

45.00

40.00

35.00

30.00

25.00

20.00

15.00
CBR
10.00 CDR
5.00

0.00
1500 1600 1700 1800 1900 2000

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Examples of demographic transitions

The Japanese demographic transition

40

35

30

25

20

15

10 CBR
CDR
5

0
1875 1925 1975

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The changing geographic distribution of the world
population

As a result of di¤erences in the timing of the demographic transition,

the geographic distribution of the world population has changed over
time.
1650 1800 1933 1995 2010
World Population 545 906 2057 5716 6909
Europe 18.3 20.7 25.2 12.7 10.6
North America 0.2 0.7 6.7 5.1 5.1
Oceania 0.4 0.2 0.5 0.5 0.5
Latin America 2.2 2.1 6.1 8.4 8.5
Africa 18.3 9.9 7.0 12.8 15.0
Asia 60.6 66.4 54.4 60.5 60.3

(Harvard Kennedy School) Hillel Rapoport PED 365, Spring 2011 10 / 33

Plan

1 Introduction
2 The demographic transition
3 Two con‡icting views on population and development
4 From stagnation to growth

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The Malthusian view

Thomas Robert Malthus (1766-1934) - Cambridge UK

"An Essay on the Principle of Population as it A¤ects the Future Improvement of
Society" (1798)

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The "old" Malthusian view

Main idea: demographic growth exceeds the capacity of agriculture to

sustain a growing population (geometric v. arithmetic growth); this
leads to demo-economic cycles with adjustments through famine,
epidemies, wars
Any increase in income (real wages) is absorbed through higher
population growth, leading to constant wages at survival levels in the
long-run (Ricardo-Malthus’s "iron law of wages")
Salvation comes from abstinence: the poor should refrain from giving
birth to too many children.

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The Malthusian view: illustration

England: 1200-1850

16 180

14 160

140
12
120
10
100
8
80
6
60
4
40

2 Population 20
Farm real wage
0 0
1215 1305 1395 1485 1575 1665 1755 1840

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A Natural Experiment Con…rming the Malthusian View:
the Black Death

1347: originating from Asia, the Black Death enters through the port
of Marseilles and spreads throughout Europe in two years, killing one
third of the population (from 80 to 56 million); the plague comes
back in other forms episodicaly in the 2nd half on the 14th century.
Due to the fall in population, the ratio of land per worker rises; real
wages started to rise tremendously all over Europe, doubling within
one century; at the turn of the 16th century however, population
started to grow again and real wage decreased; by 1650 they were
back to their 1350 levels

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The "new" Malthusian view

Paul Ehrlich, "The population bomb", 1968: predicts that within a

decade, overpopulation will cause repeated famines and resurgence of
diseases, eventually killing one …fth of the world’s population.
This did not happen but the emphasis is now on sustainable
development; examples:
Lester Brown, World Watch Institute, "Beyond Malthus" (1999):
overpopulation will constrain and even reverse economic progress
Population Action International: ”the capacity of farmers to feed the
world’s future population is in jeopardy”
Population Institute: ”The Four Horsemen of the 21st century
apocalypse: overpopulation, deforestation, water scarcity, famine”
Many examples of historical collapses of societies (Easter Island,
Mayas, Anasazi settlements) and modern con‡icts (Rwanda, Haiti)
triggered by population pressure on fragile environments (see Jared
Diamond’s "Collapse", 2004)
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The Kuznets-Simon-Boserup view

Economists have long been skeptical about the alarmist view. Why?
Theoretical arguments:
The view that people have zero productivity is incompatible with the
principle that people respond to incentives (pro…t opportunity for
employers, motives to increase one’s income for the individual).
People are not just "labor", they are also creators and innovators. In
other words, technical progress is endogenous to population size.
On the supply side, the "genius principle": the higher the population,
the more likely it is another Mozart or Einstein will come, raising the
stock of ideas; and since ideas can be shared at zero cost, new ideas
are used more e¤ectively in large than in small populations. This
principle was initially put forward by Julian Simon (1977) and Simon
Kuznets (1960).

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The Kuznets-Simon-Boserup view

On the demand side, the "population pressure" principle: population

growth spurs technological innovation precisely because it puts
pressure on scarce ressources (necessity is the mother of invention).
This was initially put forward by the Danish, UN-based economist
Esther Boserup.
If this is true, this should apply …rst and foremost to agriculture, the
sector which has the task to feed a growing population
Boserup (1981) classi…ed countries into …ve groups of increasing
population density, and showed that high-density countries have more
irrigation, use chemical fertilizers, practice multiple cropping, etc. In
short, high population densities go hand in hand with technologically
more intensive farming. Correlation and causation.

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The Kuznets-Simon-Boserup view

Esther Boserup (1910-1999) - Danish

UN-based development and agricultural economist

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The Kuznets-Simon-Boserup view

Simon Kuznets (1901-1985) - American (Russian-born)

Economic historian, Winner of the Nobel Prize in Economics in 1971

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Empirical evidence: observations

First, the doomsday scenario did not happen. For example, while the
world population doubled between 1960 and 1998, food production
tripled (including in developing countries). Still, it may be the case
that such growth is not sustainable, is discounting the future (eating
the capital of "Mother Earth")
Second, in the long-run, population growth and economic growth
have been closely associated: low for millennia, accelerating at the
same time and then both slowing down in the last period (for
industrialized nations).
Third, there are also examples of societies that grew large
demographically while at the same time preserving their environment
thanks to bottom-up (New Guinea) or top-down (Japan)
management ((see Jared Diamond’s "Collapse", 2004)

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Empirical evidence: cross-sectional results

A cross-sectional analysis gives no clear indications: today population

growth and economic growth seem randomly associated;
in addition, variations in population growth (ranging from 1 to 4
percent over the period 1960-92) are small relative to variations in
economic growth (from -2 to 10 percent). Assuming population
growth decreases economic growth one for one (ie, additional people
have zero productivity), this could at best explain one fourth of the
variation in per capita growth

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Empirical evidence: long-run results

Michael Kremer: "Population Growth since 1 Million BC", QJE1993

Testable implication: the Kuznets-Simon-Boserup hypothesis implies
a positive relationship between initial population and population
growth (in a Malthusian world), the Malthus-Ehrlich-Brown
hypothesis implying a negative relationship.
In the very long-run, population growth has been accelerating, not
decelerating; the positive relationship is compatible with the KSB
view and incompatible with the MEB view.
In the last period population growth has been decelerating;however
this is due to falling birth rates, not to to increasing death rates, as
the Malthusian theory would predict.

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Plan

1 Introduction
2 The demographic transition
3 Two con‡icting views on population and development
4 From stagnation to growth

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From stagnation to growth

As we have seen in the previous chapter, for millennia population

growth remained low (accelerating very slowly) and income levels
remained at survival levels: this is called a "Malthusian regime".
Any increase in income (due, e.g., to technological progress or to
exogenous shocks such as wars or epidemies) was matched after some
time by increases in population, keeping average income more or less
constant.
It is estimated that real incomes were about 20% higher in 1800
compared to the year 0; Europe’s peasants had about the same real
income as Egyptians peasants in pharaonic times

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From stagnation to growth

Then, around 1700 (for Western Europe), the demographic transition

started. At about the same time, an agricultural revolution had
started, followed by the industrial revolution.
For the …rst time in history, real output increased steadily, with
population …rst also growing steadily (during the transition phase),
leading to moderate gains in per capita income: this is called a
regime of "extensive (or post-malthusian) growth". Extensive growth
has now reached every region of the world.
Eventually population growth slowed down while output kept growing,
leading to sharp increases in living standards: this is called an
"intensive (or modern) growth" regime, now well established in the
Western hemisphere and in East Asia.
In other words, the demographic transition has also been an economic
transition from Malthusian to modern growth.

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From stagnation to growth
The long-term evolution of income per capita

Average world GDP per capita (USD per year)

7000

6000
DeLong
Nordhaus
5000

4000

3000

2000

1000

0
-5000 -4000 -3000 -2000 -1000 0 1000 2000

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From stagnation to growth
Another measure of real incomes

Source: Gregory Clark: "The long march of history: Farm wages, population, and
economic growth, England 1209–1869", Economic History Review, February 2007.
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From stagnation to growth
From Malthusian to post-malthusian growth

England: 1200-1850

180

160 1460

140
Farm real wage

1840
120
1750
100
1670
80

1220
60
1340
40
0 4 8 12 16
Population

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From stagnation to growth
From extensive to intensive growth

Output growth in Western Europe

1913-2001

1870-1913

1820-1870

1700-1820

1500-1700
Population

1000 - 1500 GDP per capita

1 - 1000

-0.25% 0.25% 0.75% 1.25% 1.75% 2.25% 2.75%

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From stagnation to growth

At this point, we can ask: what caused what? Given that the timings
are so intricated, the answer is complex.
There are theories explaining the long stagnation that characterises
the Malthusian epoch, and theories explaining the demographic and
economic take-o¤, and others explaining the transition to modern
growth.
In general these theories emphasize a number of (proximate?) causes,
such as the rise of property rights (Douglas North) in the cities of
medieval Europe, the sanitation and hygiene revolution, or the advent
of general purpose technologies (Schumpeter) and can explain one or
at best two of the three phases

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From stagnation to growth
For example, Nobel Prize Winner (in 1995) Robert Lucas, in "The
Mechanics of Economic Development" (JPE1988), explains that
technological progress is "skill-biased", i.e. gradually increases the
return to skills:
- at some point, this rate of return became higher than the rate at which
we discount the future (which, in equilibrium, is the rate of return to
capital), prompting people to start investing in human capital and
producing more output per capita
- this also implies that altruistic parents will invest more in the education
(human capital) of their children, gradually trading o¤ quantity for quality
(Becker, 1981), prompting population growth to decrease – see next
chapter on fertility.
Are there ultimate causes, that can account for the three phases in a
uni…ed theoretical framework? This is the ambition of the "uni…ed
growth theory" proposed by Oded Galor (Handbook of Economic
Growth, Chapter 4, 2005).
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