The Role of Fertility and Population in Economic Growth: Empirical Results from Aggregate Cross-National Data

The role of fertility and population in economic growth: Empirical results from aggregate cross-national data

James A. Brander and Steve Dowrick

Journal of Population Economics
7(1), pp. 1-25.
August 12, 1993
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Brander and Dowrick’s (1993) used new sets of data to look at how population growth and fertility affect economic growth. This paper discusses how population growth has varied throughout history. Finding that high birthrates reduce economic growth by “investment effects” and through “capital dilution”. Also when birth rates were lowered that income per capita increased.

Brander and Dowrick (1993) start by giving statistics on how the population has grown over a few periods of time and highlighte that the population has recently been increasing very quickly. This paper mentions that the growth rates peaked in the 1970’s and are currently slowing down a little. This attributes the increase in the population growth rate to technological innovations, improvements in food (both production and availability), and to increases in health care and sanitation. This increase in population growth rate slowed down economic growth.

This paper used data from Summers and Heston (1991) and United Nations World Population Prospects (1992). The data was separated into two time periods, one from 1960-1965 the other from 1980-1985. It suggested that from 1980-1985 there is a more negative relationship between population growth and per capita output growth compared to 1960-1965. Also per capita growth rate are 3.28% less in 1980-1985 compared to 1960-1965 (page 20). This is attributed to a slow down in technological progress but also mention a doubling of population in the less developed countries. This slow down in per capita growth could have just been an illusion caused by an extremely high rate of growth in the 1960 while the growth rate in 1980 was normal.

The Paper suggests that the main factor in the varying per capital income growth among countries the variation in the birthrates. The change in birth rates affects the labour supply. The most basic economic model backs this up. We are taught that as supply decreases, or the quantity of workers goes down, the price to go up. This means the wage for each worker would increase. Oppositely if the birth rates increase, this means that there will be more workers, causing their wage (price) to go down.

This data suggest that high birth rates decrease the investment in human capital. This may be true or it may be true that there is a constant amount of investment and as the quantity of children increase there is a dilution of the investment. This paper does not provide a value for life expectancy for the 1960-1965 period nor the 1980-1985 periods or if the life expectancy changed over these time periods. This statistic would allow the reader to understand whether the parents are not investing into their children because they do not believe they will reach adulthood (if life expectancy was very low), or if any changes in life expectancy can account for an increase in investment in their children. If the life expectancy were low it would promote an underinvestment in human capital. This would slow down or even reduce the economic growth rate. The reader must assume that the life expectancy does not change and that this was not a factor in choosing whether or not to invest in their children.

As birthrates fall, in countries with high initial birth rates, investment in education per children increased. This investment in human capital promotes a more intelligent worker allowing their productivity to increase. The growth rate of per capita income also increased. The general trend that a decreasing birth rate would increase per capita income was obvious. It was not clear on the magnitude of this trend. Countries with low initial birth rates had a positive relationship with investment.

Other ways to look at the data are suggested in this paper. The data could have been split up into children and adults because children need to consume less to achieve the same amount of welfare. A few externalities were not taken into account when calculating welfare. Some examples of externalities include environmental standards, policing, or freedom of speech. Since there are some things that you cannot put an absolute dollar amount on, they cannot be examined in this paper. Meaning it is somewhat incomplete.

This paper mainly outlines how population growth has changed throughout history. Two different time periods, 1960-1965 and 1980-1985, are looked at to see how the relationship between population growth and per capita output growth changed. It also looked at how the fertility rate affects labour supply and how that affects per capita income. This paper demonstrates the relationship between different birth rate and different amounts of investment in human capital. Other way to examine the evidence and other way to improve the argument of the paper are also mentioned. The paper shows that, the birth rate was lower in 1980. Also, in both time periods, as fertility increased wages decrease and lower fertility rates increased investment per child leading to a more educated and productive workforce. It also suggests that high birth rates reduce output and that a decline in fertility can lead to increase in output per person.

References
Brander, J. A., & Dowrick, S. (1994). The role of fertility and population in economic growth: Empirical results from aggregate cross-national data. Journal of Population Economics, 7(1), pp. 1-25. Retrieved from http://www.jstor.org/stable/20007418

References: Brander, J. A., & Dowrick, S. (1994). The role of fertility and population in economic growth: Empirical results from aggregate cross-national data. Journal of Population Economics, 7(1), pp. 1-25. Retrieved from http://www.jstor.org/stable/20007418