Transcript Development Economics

Development Economics
IV
Prof. Dr. Hans H. Bass
Jacobs University, Spring 2010
Development Economics
Agenda Feb. 24
1.
Historical and recent population trends
1.1 World population growth trends
1.2 The demographic transition: past and present
2.
Explaining high fertility in developing countries
2.1 A macroeconomic model (neo-Malthusian)
2.2 A microeconomic model (neo-classical)
3.
Policy options to influence size and growth of population
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1.1 World population trends
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World Population,
1750-2050
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1.1 World population trends
Population growth and
development
97 % of present net population growth is in DCs.
(1) Population explosion is the major crisis facing humankind today.
(2) Population growth impedes development (income, health,
education, self-esteem, freedom to choose ...) by challenges to food
supply, education and health systems, ecological carrying capacity.
(3) Population growth isn’t a real problem. The real problems are
underdevelopment, world resource depletion and environmental
destruction, population distribution, and the subordination of women.
(4) Overpopulation is a deliberately contrived false issue.
(5) Population growth is a desirable phenomenon.
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1.2 The Demographic Transition
Stages
Stage I: High birthrates and death rates
Stage II: Continued high birthrates, declining death
rates
Stage III: Falling birthrates and death rates, eventually
stabilizing
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1.2 The Demographic Transition
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Western Europe
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1.2 The Demographic Transition
Western Europe
I. Pre-transition stage
high and volatile death rates (famines, diseases, wars ...)
high, but not very* high birthrates
II. The demographic transition
declining death rates, esp. infants
high birthrates (“hidden momentum“)
high net emigration (to settler colonies)
III. Post-transition stage
low and stable death rates
declining birth rates
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1.2 The Demographic Transition
Contemporary DCs
II. The demographic transition
very rapidly declining death rates, esp. infants
very high birthrates (“hidden momentum“)
very low net emigration (“Fortress Europe“ ...)
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1.2 The Demographic Transition
Contemporary DCs
Poverty, AIDS
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Development Economics
Agenda Feb. 24
1.
Historical and recent population trends
1.1 World population growth trends
1.2 The demographic transition: past and present
2.
Explaining high fertility in developing countries
2.1 A macroeconomic model (neo-Malthusian)
2.2 A microeconomic model (neo-classical)
3.
Policy options to influence size and growth of population
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2 Explaining high fertility in DCs
2.1 A macro-economic model
Malthus
Thomas Malthus (1798):
unchecked population growth at geometric rates (1,2,4,8)
diminishing returns to fixed factor (land)  food suplies (proxy
for income) expand only at arithmetic rate (1,3,5,7)
stable population at subsistence level (low level equlibrium trap)
by positive checks
alternative: preventive checks (birth control)
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2 Explaining high fertility in DCs
2.1 A macro-economic model
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Neo-Malthusians
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2 Explaining high fertility in DCs
2.1 A macro-economic model
Criticisms
technological progress not considered
no clear correlation between population increase and per capita
income, especially on the < $ 1,000 p.c. income level:
fertility rates vary widely (rather a function of distribution)
death rates due to overall increased public health standards
not strongly dependent on income p.c.
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2 Explaining high fertility in DCs
2.2 A micro-economic model
Household theory
of fertility
children: a special kind of consumption (and in LDC:
investment)
fertility: a rational economic response to family’s demand for
children relative to other goods, depending on
 household income
 net price for children (benefits such as potential child
income minus costs such as education and opportunity
costs for mothers)
 price of other consumer goods
 tastes
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3 Policy options to influence size and
growth of population
Rising the net price of
children
fees
more employment opportunities for women increase
opportunity costs of having children
minimum-age child labor laws
expanded schooling opportunities and employment chances for
the better-educated
provision of publicly financed old-age social security schemes
however: rational behavior assumptions applicable only to
number of children beyond social norm
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Development Economics
Opinions
97 % of present net population growth is in DCs.
(1) Population explosion is the major crisis facing humankind today.
(2) Population growth impedes development (income, health,
education, self-esteem, freedom to choose ...) by challenges to food
supply, education and health systems, ecological carrying capacity.
(3) Population growth isn’t a real problem. The real problems are
underdevelopment, world resource depletion and environmental
destruction, population distribution, and the subordination of women.
(4) Overpopulation is a deliberately contrived false issue.
(5) Population growth is a desirable phenomenon.
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Appendix
Some equations
Human beings in the economy are
productive factor:
L(15-65)  Y
consumers:
Y  L(65+) + L0 + L(<15) = POP
Dependency Ratio: [L(65+) + L(<15)] / L(15-65)
Population Growth = Natural Growth + Net Migration
= Fertility – Mortality + Net Migration
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Development Economics
V
Prof. Dr. Hans H. Bass
Jacobs University, Spring 2010
Development Economics
Agenda Feb. 24
1. Urbanization
2. The Urban Informal Sector
3. Rural to Urban Migration
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1. Urbanisation
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Trend
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1. Urbanisation
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Projections
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1. Urbanisation
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Structure of urban
population growth
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2. The Urban Informal Sector
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The Lewis Model Revisited
Two sectors: agriculture and modern urban sector
in agriculture MPL = 0
agricultural wage rate = average product
institutional inflexibility of wage rate in the modern sector:
(a) trade unions, (b) employment strategies of TNCs
agricultural wage rate < modern sector wage rate
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2. The Urban Informal Sector
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The Lewis Model Cntd
rural to urban migration exceeds employment opportunities
in the modern sector
rationing of modern sector employment according to formal
education
short-term reaction: all sorts of odd jobs
long-term reaction: investment into formal education
increased growth potential by accumulation of human
capital
however: employment rate increases only if
industrialization more rapid than population growth
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2. The Urban Informal Sector
Characteristics
Why is, in spite of the continuous flow of migrants, urban
unemployment still low?
IS “discovered” 1973 by Keith Hart (Accra) and ILO mission to
Kenya:
(1) ease of entry
(2) reliance on indigenous resources
(3) family ownership
(4) small scale of operation
(5) labour intensive and adapted technology
(6) skills acquired outside the formal school system
(7) unregulated and competitive markets
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(Source: ILO 1973)
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2. The Urban Informal Sector
Definitions of the IS
"a mode of organisation different from the unit of production most familiar in
economic theory, the firm or corporation. These activities are also likely to be
unregulated by the state and excluded from standard economic accounts of
national income" (Swaminathan/WIDER, 1991, p.1)
"units of production, services and commerce whose management method differs from
that of the modern sector (in particular the absence of standardized accounts)"
(Lachaud/ILO 1994, p. 94)
units engaged in the production of goods and services with the primary objective of
generating employment and incomes to the persons concerned; low level of
organization (= small scale: 1-n) with little or no division between labour and
capital as factors of production; activities not necessarily performed with the
deliberate intention of evading the payment of taxes or infringing labour or
other legislation (vs. underground economy) (15th International Conference of
Labour Statisticians: ILO Official Bulletin 1993)
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2. The Urban Informal Sector
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Importance of informal
Employment
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3. Rural to Urban Migration
Harris-Todaro Model
 migration proceeds in response to urban-rural differences
(returns minus costs) in expected income rather than actual
earnings
 i.e.: migration responds positively to both
higher urban wages and
higher urban employment opportunities (= probabilities)
 migration rates in excess of urban job opportunity growth
rates are rational
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3. Rural to Urban Migration
Consequences of the
Todaro model
Which would be the result of the creation of more urban
modern-sector jobs?
Which would be the result of an expansion of formal education
in the country?
“Government overinvestment in postprimary educational
facilities thus often turns out to be an investment in idle
human resources.” (Todaro/Smith)
How about wage subsidies to increase labor-intensity of
production?
How to overcome the “urban bias”* of governments and aid
agencies?
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