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Panel on Population and Poverty (2007-2010)

IUSSP Seminar on Demographics and Macroeconomic Performance

Paris, France, 4-5 June 2010

View the Seminar Programme

 

Nurturing economic growth and reducing poverty are widely shared goals. Macroeconomic models, which focus on the interplay of an array of factors in determining the achievement of these goals, are sophisticated and highly influential, but they appear to underplay the potential contribution of demographic processes to economic outcomes. We therefore propose to hold a seminar that will:

• review the use of demographic variables in widely-used macroeconomic models, with attention to the evidence that demographic factors deserve more emphasis; and
• explore promising uses of demographic concepts and data in macroeconomic modeling and related policy analysis.

Background

The overall goal of the seminar is to further interaction among researchers delving into the relationship between demographic change and macroeconomic performance. Economists beginning with Thomas Malthus have pursued this question. Malthus, of course, predicted doom, focusing on the consequences of the "irrepressible attraction between the sexes".  Paul Ehrlich wrote in the same vein. A bit later, Simon Kuznets, Esther Boserup, and Julian Simon argued that resource shortages would stimulate human ingenuity and lead to rapid technological advancement and institutional innovation – and that these developments would spur sufficiently rapid increases in food production and living standards and avoid mass misery.

In the mid-1980s, a more neutral view came to the fore. A report by the National Research Council in the United States concluded that there was no connection between population growth and economic growth. Indeed, of the many countries in which population has grown rapidly, there is a very wide range of economic growth rates. Looking at the growth rate of a country's population as a whole, no statistically significant pattern emerges with regard to economic growth. This view, known as "population neutralism", held sway until the late 1990s.

Now, a large body of work carried out during the last 10 years has breathed new life into this issue. The salient observation that sparked this new review (and which builds on early work by Coale and Hoover and Myrdal) stemmed from the effect of the demographic transition on the age structure of a population. Economists have ignored this pattern at their peril, as it holds crucial keys to understanding the effect of demographic change on economic growth. Some of this research finds that roughly one-third of East Asia's phenomenal economic growth between 1965 and 1990 can be accounted for by the high share of working-age individuals in the countries that experienced rapid economic growth. Although this early work did not establish a causal connection from demographic change to economic growth, the posited mechanism was clear: The historically high share of working-age people in the population meant that, if those people were employed, the share of the total population that was working would be higher than it had previously been. Concomitantly, the relatively low number of child dependents meant that countries had less need to expend resources in taking care of the young or in building schools for them. Similarly, since the elderly population had not yet risen appreciably in size, there was no significant burden of the dependent elderly. These conditions prevailed throughout East Asia. The large working-age population was productively employed, leading to rapid economic growth. Numerous well-known researchers, including David Canning, Ronald Lee, and Andrew Mason, have been aggressively pursuing this line of argument.

 

The Seminar

The program will focus on those demographic variables and related concepts that are the most promising candidates for inclusion in macroeconomic modeling.  In particular:

• Population size and its rate of growth: The effect of rapid population growth on economic growth and development has an exceedingly long history, reflecting intellectual clashes between population pessimists (e.g., Malthus and Ehrlich), population optimists (Simon and Boserup), and population neutralists (Kuznets).
• Age structure: Falling fertility rates and increasing longevity, along with the effect of earlier changes in such phenomena, have resulted in dramatically changed age structures in both developed and developing countries. Changes in the shares of the young, working-age, and elderly populations have already affected labor supply, savings, and economic growth, and further such changes are certain to come. In particular, the demographic dividend that can result from a higher share of working-age individuals can have a major affect on economic growth and poverty reduction.
• Urbanization: As populations throughout the world move from rural to urban areas, and as urban areas expand to incorporate places that were previously rural, economic patterns are changing. Urbanization carries with it the potential for reductions in poverty but also for increasing misery.
• Gender: In response to lower fertility rates, cultural change, and economic necessity, female labor supply has increased in many countries (most notably in Latin America and the Middle East / North Africa). This development is a potential boon for economic growth and poverty reduction.

We have solicited empirical papers on the issues listed above, but we expect some of these papers to address theoretical issues, as well.

The historical time frame will be essentially contemporary, meaning that, in general, researchers will use data beginning from around 1950 to help understand the present and forecast economic trends in the next few decades.

To give the discussion some grounding and specificity, the program will also include a set of country case studies. These will examine the manner in which demographic change has interacted up to the present with economic development and can be expected to bear on economic development in the future. The case studies will cover Brazil, China, Nigeria, Pakistan, and a China/India comparison.

The program will include discussants, with the intention that their comments will be revised for inclusion in the eventual publication.

Finally, an overview paper will be prepared as an introduction to what we hope will be a special issue of a publication such as Population and Development Review.