Population economy - influence of population on economic welfare and business
LESSON 2


Why are population growth theories important?
uAn integral part of macroeconomic growth models
Population development has a major impact on government budgets in the long term
Technological growth is directly linked to population growth

Marriage
uWhat are economic reasons?
1.Increase of returns – division of labor
2.Imperfect credit market – extending credit and coordination of investment activities
3.Sharing collective goods – nonrival goods (house)
4.Risk pooling – one works, one is sick
5.

Are children an inferior or a normal good?
1.Theory and econometrics disagree.
2.What role does education play?
3.How much do women have a say in fertility and how much do men?
4.Do contraception and abortion reduce population growth?

Má pravdu ekonometrie nebo teorie?
1.A child is an inferior good -> as income increases, the quantity of children decreases. 2.Child
is a normal good -> as income increases, the quantity of children increases more slowly
Vysvětlující proměnná
Level of inome per capita
Low income countries
High income countries
Education - woman
-0.17 až -0,06
-1,1 až -0,19
Education – man
-0.98 až +0,55
-0,4 až -0,06
Wage - woman
-0,35 až - 0,16
-0,6 až -0,17
Wage - man
+0,05
-0,11 až +0,23
Family income
--
+0,09 až +0,38
Mortality
+0,05 až 0,28
--

The truth is in the data.
The problem of identification:
1.Use of inappropriate methods
2.Insufficient time period
3.Use of other control variables
4.Correlation or causality?
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More uneducated children or less educated children?
uThe relationship between education and the number of children is negative.
u
uTrue, however, for low-income families. High-income families have this relationship neutral. The
number of children is affected by sacrificed consumption and leisure opportunities.
u
uNatural experiments on twins confirm these effects.

I'm in charge here!
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Women decide on the number and quality of children to a greater extent than men.
Before World War II, there was no sacrificed opportunity for women.
After WW2 there is greater participation of women in the labour market -> emergence of the
sacrificed opportunity.
u

Is contraception a scourge on fertility? What about legalized abortion?
Contraception does not cause a drop in fertility, but the timing of pregnancy does.
 Insufficient literature on the subject.
Which effect is stronger?
Increasing wages and ensuring financial security leads to an increase in the number of children
or
Greater opportunity cost and therefore a reduction in demand for children.

Legalising abortion may offer the answer
1.The legalization of abortion has spillover effects on increased female school attendance and
subsequent labor supply.
2.Legalizing abortion leads to increased investment in human capital for the next generation.
3.Legalizing abortion leads to lower crime rates.
4.The political economy around abortion is complicated and controversial.
5.Women in states where abortion is illegal report lower mental well-being, greater risk of
insolvency, and increased divorce rates in the early years of a child's life.

What about macroeconomics?
Correlation vs. causation:
1.Unidirectional relationship -> GDP per capita growth leads to population growth
2.Unidirectional relationship -> Population growth leads to GDP per capita growth
3.Bidirectional relationship -> GDP per capita growth leads to population growth and population
growth leads to GDP per capita growth
4.No relationship

A miracle called empirical research? It doesn't look like it.
The authors use different methods and different control variables.
All the first three relationships are found in the country data.
The ambiguity in the relationship...is it positive or negative?
So what are the conclusions?
The direction and relationship is determined by exogenous shocks to technological growth or human
capital accumulation and country starting conditions.

And who feeds it all?
Agriculture plays a vital role in population growth. Boserup theory is the most advanced theory to
explain this relationship:

What have you learned so far?
uWe know we know something, but everyone knows it differently.
u
uInconsistency in conclusions in both microeconomic research and macroeconomic research.
u
uThe mismatch between theory and econometric research.
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Fertility
uWhat is the cost of the children? Are costs dependent on family income?
u
uWhat about revenues?
u
uDemographic transition

Mortality and Health
uWhat is the most frequent reason for mortality in history?
u
uFamine in England and France during 1500 – 1800 were mostly man made.
u
uTechnological advance in agriculture leads to 50% increase of consumption of food.
u
uImprovements in nutritional status explains 90% of decline in mortality rate
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Migration
uWhy people want to migrate?
u
uWhat is the impact of regulations on migration?
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uWhat is the effect of migration to the labor markets?
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u
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u
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uAssimilation of immigrants
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Aging, Demographic Composition, and The Economy
uRetirement and social security
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Aging, Demographic Composition, and The Economy
uPresent versus future consumption and effect of interest rate
u
uBequest
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Dissaving
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u
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Aging, Demographic Composition, and The Economy
uAging and labor market
u
uThe response of social security system to demographic change

Aggregate Population Change and Economic Growth
uDoes population growth causes GDP growth or vice versa?
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uSociety and social institutions and effect on population growth
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uPopulation growth in the long run and short run
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uDistribution of intergenerational welfare