Friday, January 05, 2007

A Demographic Divide?

In the post below Edward discusses the demographics of Nigeria and more specifically how economic growth also is effected by high fertility parallel with the situation of economic growth and low fertility which is perhaps more widely cited here at Demography.Matters. As Edward notes in relation to Nigeria and more generally in the context of many sub-Saharan Africa high fertility is at the heart of the growth issue. The point here is in fact the savings rate and crucially what we could call a Malthusian trap where all the income is used for consumption and thus there is no room savings/investment dynamics (capital accumulation). Robert E. Lucas also explains this process in terms of the growth feedback with Malthusian population dynamics.

Between year 0 and year 1750, world population grew from around 160 million to perhaps 700 million (an increase of a factor of four in 1,750 years). In the assumed absence of growth in income per person, this means a factor of four increase in total production as well, which obviously could not have taken place without important technological changes. But in contrast to a modern society, a traditional agricultural society responds to technological change by increasing population, not living standards. Population dynamics in such a society obey a Malthusian law that maintains product per capita at $600 per year, independent of changes in productivity.

This is a subtle point though since as also noted by Stirling in the comments section capital accumulation occurs with diminishing returns so the feedback with growth is not linear in the long run. For an excellent conceptualization of the theoretical aspect of the argument I recommend Paul Krugman's article from 1994 about the myth of Asia's growth miracle (PDF).

This has been a small deviation from my original point with this post which was to discuss the concept of the demographic divide as it is being outlined in this article by Mary Mederios Kent and Carl Haub from the Population Reference Bureau. Interestingly enough the article makes kind of the same juxtaposition as Edward does below between a country with a comparatively low fertility (Japan) on one side and a country with a comparatively high fertility (Nigeria) and how this has a profound effect on the two societies.

Public attention has begun to focus on the "demographic divide," the vast gulf in birth and death rates among the world's countries. On one side of this divide are mostly poor countries with relatively high birth rates and low life expectancies. On the other side are mostly wealthy countries with birth rates so low that population decline is all but guaranteed and where average life expectancy extends past age 75, creating rapidly aging populations.

But this gulf is not a simple divide that perpetuates the status quo among the have and have-not nations. Rather, it involves a set of demographic forces that will affect the economic, social, and political circumstances in these countries and, consequently, their place on the world stage. Demographic trends are just one of the factors determining the future of these countries, but these trends are a crucial factor.

The main point here is then to emphasize the real but very diverging impact different levels of fertility have on the economic environment as a function of how far along a country has ventured in the demographic transition. But perhaps also to point to the idea of a demographic divide and how we can use this to conceptualize the global demographic environment?

2 comments:

S.M. Stirling said...

In point of fact, the American labor force continues to grow at a healthy but not excessive clip -- and shows every sign of continuing to do so for the forseeable future.

The number of children born each year is at all-time highs, the number entering the labor force each year is increasing, and given the size of the age cohorts under 18, will continue to do so.

And the national TFR has increased _every year_ for the past decade; at 2.1, it now stands at the highest level since the 1970's. With, again, no reason to believe this trend won't continue.

Given a continuation of present trends, American TFR's would be at about 2.4 by the 2020's.

Not coincidentally, the US economy as a whole continues to expand briskly -- 3.4% for the last quarter of 2006, which is the fourth successive year of growth well over 3%. In fact, the 2003-2007 period has had an average of about 3.6%, maintaining the long-term trend of around 3.5%.

The downturn in housing prices and auto sales has been shrugged off, consumer spending is expanding rapidly (4.4% for 2006) and if you subtract housing and autos, 2006 had growth at 5.8%.

Exports are up 10% for the year, and exports to China up 30%.

The first decade of the 21st century is turning out to be an almost exact duplicte of the 1990's.

dave said...

Surely the key word here is "diverging"? The point is that on the contrary, we're converging, or at least those who aren't yet will be doing so within a few decades. And that convergence offers once-only development opportunities for countries in dire need of them. We should be looking to the future and seeking to capitalise on those opportunities to our collective advantage. Nobody wants to spend forever bailing out a lot of developmental basket-cases: "So don't do it" should be the message, "Do better when the time comes, or quit whining".