Download From the Malthusian regime to the demographic transition

Luis Currais
From the Malthusian regime to the
demographic transition:
Contemporary research and beyond
V. II N. 3 JUNHO pp. 75-101
Luis Currais *
1. Introduction
The effects of economic factors on fertility and mortality were
a central element in development for Malthus (1798). Other economists such as Adam Smith (1776), Schumpeter (1954, pp. 163-164) and
David Hume (Rostow, 1990) also discussed the link between population and subsistence resources. According to their predictions, rising
prosperity would yield a greater increase in population growth until a
food supply limit was reached.
Although the findings of empirical studies do not support the
“Malthusian paradigm” (Shultz, 1985, pp. 1126-1154; Kremer, 1993,
681-716) its impact meant that population began to be treated as an
endogenous element derived from economic and social conditions.
This work is restricted to studies which are related to the problem of population and growth. We analyze the evolution of fertility
and mortality rates and other important facets of population growth
literature. It can be observed that the changes in reproductive behavior, which occur during the economic development process are strongly
linked to the transformation of traditional agricultural economies with
rudimentary technology, into modern societies. Before this transition
takes place fertility rates are high and the use of contraception is virtually absent. Conversely, the vast majority of couples in developed
* We are especially grateful to Jordi Caballe, Howard Carter, Berta Rivera and
Manuel Gomez, and to participants at the Annual Congress of the German Economic
Association for discussions and valuable comments. We thank the financial support
from La Coruña University, N. 64902-25507.Correspondence to: Luis Currais,
Department of Economic Analysis, Faculty of Economics, La Coruña
University,
Campus da Zapateira, 15071, La Coruña, Spain. Tel: (981) 167000; Fax: (981)
167070. e-mail: [email protected].
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From the Malthusian regime to the demographic transition
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societies limit their family size, which evolves according to the altruism of parents.
There are several factors that have crucial effects on fertility
levels and their trends. Several authors have studied the relationship
between fertility, population and economic growth and its
consequences for development and well-being. Recent literature
considers the mortality rate as an endogenous variable that depends
fundamentally on health care. A genuine understanding of the economic
growth process should contemplate the extent to which fertility and
longevity affect the population growth rate, when considered as
endogenous variables related to the socio-economic process.
Our analysis follows the evolution of the main paradigms
contained in the literature on population and growth literature and
their contribution to our understanding of demographic phenomena.
We examine the historical evolution of the relationship between
population growth, technological change and standard of living. The
way in which this evolution takes place is presented through the
progressive treatment of key variables as endogenous to the growth
process. We cite various studies, which identify some key variables
that act either exogenously or endogenously and which provide us
with a variety of insights into government policy.
This paper is organized into six sections. In the following section
we briefly review Malthusian population theory and later refinements
of it, which incorporate a more formal analysis of its static and dynamic
components. Section three presents the most important references on
endogenous population growth. This section focuses on the effects of
child rearing costs and their importance for fertility models. This
literature reflects the relationship between economic variables and
population as a complex web of factors related to the incentives to
have children and which depend on the cost of quantity and quality of
children. Section four explores a relatively new line of research followed
by some authors. These works stress the role of health, and study the
multiple implications of improved health on morbidity and longevity.
Economic development and health status influence the population
growth rate through their impact on fertility and mortality rates. The
relationship between the endogenous mortality rate, productivity and
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Luis Currais
growth is also analyzed in this section. In section five we analyze the
different demographic regimes and the demographic transition. We
discuss social and economic changes, beginning with the Malthusian
paradigm and examining transitional demographic dynamics and the
modern demographic evolution of societies through different economic
models. Section six concludes with the main remarks and their relevance
for both economic and population growth process, whilst discussing
areas of potential future research.
2. Malthus and the classical theory of population and growth
The main thesis within Malthusian population theory is the
dependence of population growth on the material conditions of the
economy. Human biological capacity to reproduce would surpass the
physical capacity to produce. In this context the food supply would be
not sufficient to accompany increasing demand. In Malthus’s view,
the perfection of a human society free of coercive restraints was utopian,
because the capacity for threat of population growth would always be
present. When population size is small, the standard of living will be
high, and population will grow as a natural result of passion between
the sexes. Without constraint, population would rise geometrically,
but food production rises only arithmetically.
Malthus reversed the arguments of mercantilists whose posited
that the number of people determined the nation’s resources, adopting
instead the stance of the Physiocrats who stated that the resource-base
determined the number of people. Population growth would be
checked by the growth of food production and the Mathusian trap
would emerge as a result of a dismally low level of per capita
consumption. Deviations from this trap would be only possible by
“negative or preventive checks” on the birth rate, giving special
emphasis to the characteristic late marriage pattern of western Europe,
which he called “moral restraint” or by “positive checks” on the death
rate through the periodic outbreak of wars, malnutrition, pestilence,
disease and famine. The other preventive checks which he mentioned
were birth control, abortion, adultery and homosexuality, all of which
as an Anglican minister he considered immoral.
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The Malthusian model implies that the source of possible short
run deviations from the population’s equilibrium level is related to
the motive of parents for having children. Once children are considered
as capital goods, which are produced at constant costs, an increase in
the labor demand would raise the expected returns of having children
and increase the fertility rate. In the absence of changes in technology
or in the availability of land, population would be stable around a
constant level. Those improvements in technology, which occur in
the long run, would be offset by increases in the size of population.
The assumptions of the Malthusian model are consistent with
the historical evolution of technology, population and per capita output
for most countries. Economic development allows us to infer, in
Malthusian terms, that the emergence process from the Malthusian
trap was slow and the positive check was being weakened whereas the
preventive check was being progressively enforced.
Although economists before Malthus made some of the
observations which Malthus made, it was the work of Malthus which
had the greatest influence on the major classical economists that
followed him.1 Perhaps the most important legacy of Malthus has
been the treatment of population growth as endogenous to the economy
as a result of both economic conditions and the motives for having
children. These and other aspects of the classical theory are discussed
in contemporary economic literature in models that emphasize the
existence of multiple equilibria, including a poverty trap, and the
importance of both fertility and mortality in economic growth.
3. Endogenous population growth: The role of fertility models
and child rearing costs
Prior to the 50s, apart from the Malthusian theory of population
change, economists paid scarce attention to questions related to family
Before Malthus, see for instance Botero (1589), Adam Smith (1776), Schumpeter
(1954, p. 255) and David Hume (Rostow, 1990). The influence of Malthus may be
noticed first in the works of Ricardo and John Stuart Mill and his propositions
remain on the development of modern population and growth theory.
1
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and its consequences for fertility and the economic development
process. Firstly Long (1958) and later Mincer (1962), argued that the
participation of married women in the labor force is determined not
only by their potential earnings, but also by their husbands’ earnings,
the number of children they have and other family characteristics.
A modern economic analysis of fertility began to replace the
Malthusian analysis, and the parental demand for children has been
shown to depend on family income, how parents value their time and
the “quality” of children (Becker, 1960; Easterlin, 1968). Alternatively,
several researchers looked at human capital investment, taking into
account the relationship between parental investment in their children’s
education and the children’s productivity (Schultz, 1963; Becker, 1994).
Following the work of Becker (1960) in which he analyses the
behavior of demographic and economic changes in developed countries
and the role of fertility, several authors have studied the feedback
between population growth and development. Economists generally
assume that there are two basic reasons to have children: the provision
of material benefits to the family unit, and the consideration of children
as pure “consumption goods” which implies the pleasure parents derive from their children’s existence. In both cases the specifications which
are used can be viewed as an expression of parents’ altruism. The material benefits of having children might include the contribution of
labor services to a family business or even in looking after parents in
their old age. We therefore review the studies that have attempted to
determine the extent to which these affect fertility rates and what this
implies for population levels and growth.
The hypothesis which puts forward exogenous population
growth as inherent in the neoclassical models of Solow (1956, pp. 6594), Cass (1965, pp. 233-240) and Koopmans (1965), which neglect
interactions between the economic growth process and demographic
trends is clearly unsatisfactory. These models are unable to capture
the observable diversity of population growth through the variance in
the behavior of fertility and mortality rates among different countries.
We might make a similar observation for a single economy over time
and around the development process.
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Endogenous population growth literature has progressed along
two basic theoretical lines of research. On the one hand, we find those
studies that follow the neoclassical growth model where the economic
growth rate is exogenously determined and, on the other those models
based on endogenous economic growth.
The neoclassical model offers a comprehensive, rigorous
treatment of population and income variables, although per capita
income growth is exogenously determined. In this context, our study
focuses on some of the models that treat population growth as an
endogenous variable. The analysis of endogenous population growth
along with the analysis of several economic factors in different static
and dynamic environments yield distinct results. In the literature of
population and growth we can highlight the importance of certain
factors like the quantity and quality of children and the effects of the
social security system, and the role of intergenerational transfers. These
factors are considered in either endogenous or exogenous economic
growth research.
The first systematic analysis of the interaction between quantity
and quality of children is offered in Becker and Lewis (1973, S279S288). This is a static model, which stresses the role played by the
desired human capital of children. The model therefore, does not allow
us to analyze the dynamic aspects of the interaction between quantity
and quality of children. Parents maximize a utility function where
both quantity and quality enter as distinct elements, which are subject
to a specific budget constraint. The problem they study is formalized
as max U = U ( x , q , y ) , subject to I = xqP + yPy , where x is the number
of children, q is their quality, y is the consumption’s rate of other
commodities, I represents income and P is the price of a unit of child
quality. The model offers a simple explanation for the observation
that when income increases the fertility rate decreases. The shadow
price of the number of children x is greater the higher their quality q
and the shadow price of q is higher the greater x is. The income elasticity
of demand for quality is higher than that for quantity. Thus, when
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income increases the shadow price of quantity increases more than the
shadow price of quality.
The work of Eckstein and Wolpin (1985, pp. 93-106) focuses
on the role of the stock of human capital of working adults. The cost
of children is a function of parents’ income, which affects the cost of
child rearing. They assume that per capita income is a function of human
capital accumulation, and that they are positively correlated. In their
model the fertility rate first rises and then falls, thus explaining a basic
feature of the demographic transition. We may consider the models of
Becker and Barro (1988, pp. 1-25) and Barro and Sala-i-Martin (1995)
as extensions of the previous two models. Although Barro and Sala-iMartin (1995) use a continuous time approach and Becker and Barro
(1988) use an overlapping generations framework in two time periods,
the general results are quite similar. Parental decisions about numbers
of children are made jointly along with choices about consumption
and intergenerational transfers. The choice of the number of children
interacts with the determination of their quality, which depends on
consumption and the quantity of capital stock allocated to each person.
The fertility rate depends on the marginal utility attached to children,
which diminishes with their number.
Intergenerational transfers and more specifically the social
security system have potentially important implications for fertility
behavior. Leibenstein (1963) was one of the firsts to argue that social
security policies may reduce fertility. Weight was given to this
assumption by various studies, some of which we highlight here.
Nugent and Gillapsy (1983, pp. 809-830) and later Entwisle and
Winegarden (1984, pp. 331-354) carry out similar empirical studies based
on a cross-section analysis of groups of less developed countries. They
also obtained similar results. Changes in the fertility rates are negatively
related to the social security proxy variable, after controlling for other
explanatory variables.
For Cadwell (1976; 1982) in any society and at any stage of
economic development the fertility rate is fundamentally determined
by the direction of the intergenerational flow of wealth. In the less
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developed societies children contribute to their parents’ wealth, while
in developed societies it is the parents who leave bequests or invest in
children’s human capital. This process increases the cost of having
children and consequently decreases the fertility rate.
A different approach is considered by Willis (1989). In order to
analyze the role of old-age security on fertility he considers the existence
of uncertainty with respect to one’s longevity and imperfect annuity
markets. He concludes that within this context fertility increases in
comparison to a perfect market situation.
Cigno and Rosati (1992, pp. 319-341) develop a three-stage finite
horizon model in order to analyze the effect of social security on
fertility. They compare the strength of parents’ self interest and the
intergenerational altruism through the impact of the social security
system. The model considers that young working parents support their
parents and “lend” resources to their children at a given interest rate,
and then collect on these loans for old-age support, so children’s utility
is specified as a part of the parents’ utility. Using Italian time series
data they present three sets of results that depend on the relative strength
of the selfish old-age security motive and the intergenerational altruism
motive.
Ehrlich and Lui (1991, pp. 1029-1059) realize a cross-section
analysis for 65 countries, which includes both poor and rich countries.
They find that, after controlling for GDP and measurements of both
young-age and old-age longevity, social security benefits as a percentage
of GDP in 1960 had a significant negative impact on the birth rate in
1965 and on the total fertility rate in 1975 in poor countries. For
relatively rich countries however, they do not obtain the significant
effects observed for poor countries.
An important conclusion can be derived from these studies.
The quantity of children is not the only important variable within
parental control. When we consider the quality of children and the
availability of savings opportunities as complementary choice variables,
the effect of the reduction on fertility due to the provision of old-age
social security is not clear (see Wildasin, 1990, pp. 414-428; Ehrlich &
Lui, 1998, pp. 390-409).
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In the last few years research has contributed important new
results to the literature on population and growth as endogenous
variables. We take a look at some of the studies which are based on
models where economic growth and population growth rates are
endogenous and simultaneously determined as a result of distinct initial
conditions or changes in the parameters of the model that yield
economic growth.
The work of Becker, Murphy and Tamura (1990, pp. S12-S37)
represents an important reference point, since they have been the first
to offer an endogenous population and growth model based on explicit
micro-foundations that provide an explanation for some of the features
of the demographic transition. In their model, the time parents spent
on investing in the human capital of their children, and the number of
children, are choice variables. The rates of return on investment, in
both the quantity of children and their human capital, depend on both
the level of human capital of the dynasty head and the chosen number
of children. The per capita income growth and consumption are
endogenous variables that depend on human capital, which is considered
to be the engine of economic growth. The optimal solution of the
model presents three steady-state equilibria: a stable state, which is a
low-level state, with a low level of human capital and zero growth, an
intermediate but unstable state of development, and a stable state of
perpetual growth with higher human capital. If the initial level of
human capital is higher than a threshold level, which is linked to the
unstable development equilibrium, then human capital investment
becomes more worthwhile, the fertility rate is lower than other
equilibria, and growth is persistent. If the initial level of human capital
is lower than this threshold level, the economy moves towards a
Malthusian regime characterized by high fertility, no investment in
children’s human capital and no economic growth.
Ehrlich and Lui (1991; 1998) develop a three period overlapping
generations model where young parents decide on the number of
children, the amount of human capital investment per child and the
expected material compensation from their children in old-age. The
existence of intergenerational trade allows for implicit contracts
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between parents and children, and eliminates the multiple equilibria
of outcome and the problem of potential intergenerational externalities
of the Becker, Murphy and Tamura model. In their model the optimal
solution is unique at any particular point in time. The motive for having
children depends on the rate of return to parents which is a function
of the life expectancy of children and parents, their time preference,
the human capital technology and the optimal rate at which children
compensate their parent’s investment in them.
The latter two models share some key features. In both models
the engine for growth is human capital and fertility behavior is a
consequence of the relationship between quantity and quality of
children. In a dynamic context there is a feedback effect between
population and growth, which also depends on other factors that jointly
determine the process of economic development. Although these
dynamic relationships give us some insights into the association between
income, education and fertility across economies, there are some aspects
of the demographic transition that are not considered. The role of
mortality, which is an important part of the demographic transition is
not explicitly modeled. This gap in research might be filled by more
fully analyzing the implications of human capital and health investment
on longevity and fertility pointed out by various authors and supported
by various studies which have been carried out by the World Bank
and the World Health Organization, and which we discuss in next
section.
4. The mortality rate, health spending and economic growth
Human health and its relevance to population growth is one of
the great themes of human history. Although demographic changes
and trends with respect to health are closely linked, they are often
considered separately. The relationship between health and population
is a two-way process that yields feedback. Each can be a determinant
as well as a consequence of the other. The way in which they influence
each other may be a fundamental factor when deciding public policy
and intervention.
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The world-wide situation today with respect to health is
characterized by the huge differences in the mortality profiles of those
who live in developed, developing or underdeveloped countries. In
the most developed countries, there is an enhanced expectation of life
at birth, an important component of which is improved survival in
early life, particularly from birth to the first birth year. According to
the World Bank Health Report (1993) and WHO (1993) there are four
groups of factors which contribute decisively to high levels of life
expectancy: rising incomes, health expenditure, improvements in
medical technology, and shifts in social behavior and cultural factors
such as education and in particular female education.
Each of these groups of factors has influenced the decline in
mortality rates and increased life expectancy in different countries to
varying degrees. The role of preventive and curative policy depends
on the level of development of medical technology and the level of per
capita health expenditure within the society. The contribution of any
one specific factor to contemporary declines in mortality would be
difficult to quantify, but these declines are certainly influenced by recent
advances in medical technology and increases in health expenditure,
whereas historically, declines in mortality were more as a result of
economic factors such as education, nutrition and behavioral changes.
According to the World Bank, differences in health spending
are an important starting point in the search for an explanation of the
differences in health and mortality rates among countries. In 1990,
total annual health spending ranged from less than $10 per person in
several African and Asian countries to more than $2.700 in the United
States. There was also considerable variation within regions. In Africa,
Tanzania spent only $4 per capita on health in 1990, while Zimbabwe
spent $42 per person. In Asia, Bangladesh spent $7 per person each
year, as against $377 in Korea. Since the share of GNP devoted to
health tends to rise with income, the difference between what rich and
poor countries spend on health is even greater than their difference in
income. As a consequence of this, life expectancy ranges from forty
years or less in some countries in Sub-Saharan Africa to seventy-five
or more in developed economies. In Sub-Saharan Africa half of all
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deaths occur below the age of 5. In the developed economies half occur
after the age of 74. Child mortality rates exceed 200 per 1.000 in several
African countries but are below 20 in the richest countries. The level
of disease, in per capita terms, is five times higher in developing regions
than in the healthiest regions. Falls in mortality and morbidity rates,
which are linked to per capita health expenditure and their
consequences for a healthier population and work force, are important
in promoting economic productivity and fomenting economic
development. In the long run the benefits of improved health are also
likely to influence the way work is organized and carried out.
Endogenous population growth literature also points out the
important link between human capital and health economics theories
and their consequences for fertility and longevity (Grossman, 1972;
Ehrlich & Chuma, 1990, pp. 761-782). Different authors focus on the
relationship between population, growth and human capital, stressing
the role of health by using different theoretical and empirical
approaches. In studying the implications of health economics on
economic growth Barro and Sala-i-Martin (1995, p. 432) find that life
expectancy should be considered as an important growth factor. They
calculate that a 13 year increase in life expectancy would yield an
increase in the annual growth rate by 1.4 percentage points.
Jablonski, Rosemblum and Kunze (1988, pp. 34-38) obtain similar empirical conclusions for life expectancy. They study the
relationship between life expectancy, productivity and health. Their
results support the theoretical and empirical findings of Currais and
Rivera (1999a, pp. 258-267;1999b, pp. 761-764) where health
expenditure, used as a proxy of health status, increases productivity
through its effect on human capital accumulation. Estimates are made
for the OCDE countries for the period 1960-90. They find that
investment in health contributes in a significant way to explaining
variations in output through human capital, even in those countries,
which presumably have high levels of health. This result is justified
fundamentally by the decrease in the depreciation rate of human capital and the reduction in morbidity which affects the mortality rate.
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There are several empirical studies that study the positive
correlation between higher per capita health expenditure and lower
mortality rates (WHO, 1993; Kawachi et al., 1997, 1491-1498). Beyond
this relationship we find those works that analyze the positive impact
of higher health spending on lower mortality rates and higher economic
growth, which would be probably bounded in the most developed
countries (World Bank, 1993; Fogel, 1997). Evidence obtained by these
authors was very important in promoting new research based on
dynamic models, which incorporate trends in mortality, fertility,
intergenerational transfers and economic growth.
Blackburn and Cipriani (1998, pp. 517-534) develop an
overlapping generation model where parents choose savings and births
and may also reduce infant deaths by incurring expenditure on health
care, which is also provided by the government. A generalized
production technology accounts for long-run endogenous growth.
Their results confirm the importance of health care on reducing
mortality rates. Economic and demographic outcomes are determined
jointly in a choice-theoretical model of fertility, mortality and capital
accumulation, and the results support the empirical evidence on the
relationship between demography and development.
A different benchmark is presented in Currais and Gomez (1999)
and Currais (2000). They use an infinite horizon framework that
represents an altruistic link between parents and children, to the
children’s children and so on. Individuals choose their consumption
levels and the number of children they have in order to maximize
the household optimization problem. The intertemporal dynastic
utility function can be formally described by
U =
∫
∞
0
e − ρt
[ N ψ ( c + ϕ g )( n − d ( gˆ )) φ ]1 − θ − 1
dt
1−θ
where p is the rate of time preference and represents parental altruism.
N is the size of the family, n is the fertility rate, and d ( gˆ ) is the mortality
rate. The family’s budget constraint in per capita terms is represented as
k& = w + [( 1 − τ k ) r − n + d ( gˆ ) ]k − bnk − ( 1 + τ c ) c − ( 1 − s g ) g − R
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where w is the wage rate, r is the interest rate, tc is the consumption
tax rate, tk is the capital tax rate, sg is the subsidy rate and R is a lump
sum tax and bk denotes the opportunity costs that increase as parental
capital increases. The number of children depends on the child rearing
costs and health spending, which in turn also affects the mortality
rate. Higher health spending produces a lower mortality rate and a
higher per capita capital in the steady state. The analysis reveals that
the mortality and the fertility rates are correlated both significantly
and negatively with per capita income. As the economy develops both
the mortality and the fertility rates fall, and these falls are accompanied
by an increase in per capita income, which characterizes the
demographic transition.
Recent works attempt to explain how developing economies
have typically moved from a state of low per capita income, high
mortality and high fertility to a regime of persistent growth in which
first mortality, and then fertility are continuously declining while per
capita income presents persistent growth. The following section
discusses this phenomenon, known as the transition from the
Malthusian regime to the modern demographic transition.
5. From the Malthusian regime to the demographic transition
Over approximately the last sixty years the demographic
transition has been a leading topic for growth economists interested in
population growth and modern demography. Notestein’s article (1945,
pp. 36-57) is generally regarded as the first acceptable formulation of
the demographic transition theory. The first outline of the theory
however was undertaken somewhat earlier by the Office of Population
Research in Princeton which based its work on previous research
carried out by Notestein et al. (1944). Indeed, Notestein did not refer
to his generalization as a transition. The first to use this expression
was Adolphe Landry (1934) and some years later Davis (1943) referred
to the “transition” in a publication that he edited and which was
published almost at the same time as Notestein’s work.
The demographic transition theory is based on the idea that
the societies which undergo a process of modernization, progress from
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a pre-modern regime of high fertility and high mortality to a postmodern regime, in which both decrease. The key term “modernization”
includes the crucial questions about causation that form the subject of
much of the modern demographic literature.
The basis of the demographic transition model is a classification
of populations which are differentiated in terms of their distinct
combinations of fertility and mortality. Thompson (1929, pp. 959975) carried out the first formulation of this type, which is to be found
in English demographic literature. He specified three groups of
countries with different rates of population growth. In the first group
are to be found the countries from Western Europe along with
countries, which were originally settled by European immigrants.
Although mortality in these countries was low, their rapidly declining
fertility rates indicate first a stationary and then declining population
growth. The second group included the countries of Eastern and
Southern Europe. For these countries both birth and death rates had
fallen, but death rates had declined sooner and more rapidly than birth
rates. As a result their populations grew very rapidly, until they reached
a stationary state which was then followed by declining population.
This trend is comparable to that of the first group some 35 to 40 years
earlier. In the third group Thompson suggested that we would find
nearly 75 per cent of the world’s population. The lack of data confined
his analysis to those countries were data was available, that is, to Japan,
India and Russia. Those countries in which neither birth nor death
rates were under control were classified as Malthusian.
Following the work of Thompson, Landry (1934), also
postulated three stages of population development: primitive,
intermediate and contemporary. It was roughly equivalent to
Thompson’s classification, although Landry’s analysis of the decline
in mortality and fertility rates was much more in depth than that of
Thompson. Later, Notestein (1945) presented a typology of populations
which has many parallels with the works of Thompson (1929) and
Landry (1934). His study analyses three types of populations as a way
of introducing a review of the potential effects of world population
growth. For him the changes in norms and values associated with the
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process of modernization were the major reason for the decline in
fertility.
Coale and Hoover (1958) and later Coale (1963, p. 69) stressed
the importance of the socio-economic aspects of the modernization
process, although they paid more attention to cultural factors. Their
works are indispensable reference points in population growth
literature. Their main conclusion was that national economic growth
is impaired if fertility levels greatly exceed mortality levels. The
implications for demographic transition theory were that transition
was made possible only by profound changes in the social structures
of societies.2
In 1974 Julian Simon assessed and summarized much of the
research evidence available on fertility and economic development
concluding that everywhere fertility is subject to much rational control.
This rational control is directly linked to higher educational levels
and advances in birth control. According to Kremer and Chen (1999,
pp. 155-160) the presumption that as education levels rise, fertility rates
fall is a strong evidence in developing countries. They suppose a
production technology represented by
Y = LαS L1U−α
where L S and L U are the number of skilled and unskilled workers.
Income distribution dynamics depends on the simplified utility function
that is given by
U = ln( n ) + X
where n is the number of children and X is consumption. They used
data from 62 countries from 1974 to 1995, regressing total fertility on
women’s years of education. Fertility differentials between educated
and uneducated women are typically greater in countries with high
Gini coefficients of inequality. For example, in Brazil, women with
no education have three times as many children as women with ten or
more years of education. Since children of the uneducated are less likely
Evidence on demographic transition theory can be found in Rostow (1990) and
Kirk (1996, pp. 361-387).
2
Econômica, nº 3, pp. 75-101, junho 2000
Luis Currais
to become educated, this threefold difference in fertility creates a major demographic force, which increases the proportion of unskilled
work force.
We can take the main arguments used for national populations
and apply them to individual families in order to focus the analysis of
population growth on the “ideal family size”. This was the main
postulate in subsequent research, which culminated in various studies
on rational fertility control. The analysis which followed therefore
were to focus not only on behavioral rationality with respect to fertility
but also on behavioral economic rationality. The central idea was that
family size would tend to correspond to a number, which maximizes
the net utility to be derived from having children in the society. Within
this framework of rational decision, fertility decline may be viewed as
a rational response to economic and social changes within society.
The majority of the recent literature on the relationship between
population growth and output has been directed towards analyzing
the various aspects and evidence of the modern demographic regime
and the demographic transition. This process of demographic transition
have taken shape in the developed countries over the last century, and
which are now taking shape in much of the rest of the world. The
studies cited in the previous sections, focus on the negative association
between income and population growth through numerous works
based on cross-sectional analysis of countries or time series data.
The dynamics of population growth reflected both changes in
constraints and qualitative changes in household behavior induced by
the economic environment. High levels of both fertility and mortality
had characterized the Malthusian demographic regime. As living
standards rose, mortality fell. Reductions in mortality rates initially
led to an increase in population growth, both because more children
reach breeding age and because individuals live longer. The initial effect
of higher income was an increase in fertility, mainly by causing an
increase in the propensity to marry. According to Dyson and Murphy
(1985, pp. 399-440) fertility rates increased in most of Western Europe
until the second half of the nineteenth century, peaking in England
and Wales in 1871 and in Germany in 1875. But as income continued
Econômica, nº 3,pp. 75-101, junho 2000
91
From the Malthusian regime to the demographic transition
92
to rise, population growth fell further below the maximum rate that
could be sustained given the mortality regime. The reduction in fertility
was extremely rapid in Europe around the turn of the century. In
England, live births per 1000 women aged 15-44 fell from 153.6 in
1871-80 to 109.0 in 1901-10. The reversal in the Malthusian relationship
between income and population growth was directly linked to an
increase in the level of resources invested in each child. Matthews et al.
(1982) point to an increase in the average number of schooling years in
England and Wales from 2.3 for the cohort born 1801-05 to 5.2 in
1852-56 and 9.1 for the cohort born 1897-1906. Maddison (1982, 1995)
analyze the relationship between the population growth rate and the
growth rate of per capita income for Western Europe over the period
500/1990. His analysis indicates that from the year 500 to 1820 the
population growth rate was exceeded the income per capita growth
rate until 1820, when this tendency changed. From 1820 to 1990 per
capita income growth increases progressively in comparison to the
population growth rate which decreases continuously.
Recently Kremer (1993) and Lucas (1996) reexamined the
Malthusian regime in two different papers. The former develops a
model in which the rate of technological progress is proportional to
the size of the population. His model yields an acceleration in the
growth rate of total output whilst the level of per capita output remains
constant and the demographic transition does not follow that stage.
The latter develops a Malthusian model in which households make
optimizing choices with respect to fertility and consumption, but the
transition from this regime is not considered.
Gary Becker et al. (1999, pp. 145-149) explores the implications
of human capital accumulation and urban-economics on population
and economic growth as determinants of the demographic transition.
For them, in modern urban economies, the increased density that comes with bigger populations and greater urbanization promotes higher
investment in human capital, specialization, and the rapid accumulation
of new knowledge. They consider two different effects which take
place and these depend on the relative density of the population of the
city. On the one hand, population may reduce productivity because of
Econômica, nº 3, pp. 75-101, junho 2000
Luis Currais
traditional diminishing returns from the more intensive use of land
and other natural resources. On the other hand, bigger cities with high
population densities tend to encourage greater specialization and greater
productivity, and these factors lead to increases in per capita income
and increases in the shadow cost of having large families compared to
investing more in each child. Rather than explicitly modeling a utility
function and a value function for a dynastic family, they assume a
parental utility function such as
U = u ( c) + an1−eV ( q )
where e is the elasticity of parental utility with respect to number of
children, c is consumption, n is the number of children and q is the
human capital level of each child which is produced primarily in the
urban sector. Here the utility function is separable between current
consumption and children’s human capital depends not only on
parental time and parental human capital but also on population density
which is greater in big cities. The demographic transition towards
smaller families in economies with initially high fertility and low per
capita incomes may be stimulated by an initial growth in population.
The consideration of urban-economics introduces a new and important
element into the analysis of the demographic transition through its
implications on income and population growth.
Galor and Weil (1999, pp. 150-154) adopt a different approach
and develop a single unified model, which describes the whole economic
transition process from the Malthusian regime to the modern growth
regime. In the Malthusian regime, there is a link association between
population growth and the level per capita income. Technological
progress is slow and offset by proportional increases in population,
thus per capita output remains stable at a constant level. In the postMalthusian regime, the growth rates for technology and total output
increase. Population growth absorbs much of the growth of output,
but per capita income rises slowly. The positive relationship between
per capita income and population growth is reversed and the economy
undergoes a demographic transition. In the modern growth regime,
population growth is moderate or even negative, and technology and
Econômica, nº 3,pp. 75-101, junho 2000
93
From the Malthusian regime to the demographic transition
per capita income increase rapidly. The evolution of technological
change leads to a rise in the rate of human capital return. Parents switch
from quantity to quality of children in response to technological
progress, rather than in response to changes in the level of income.
The building of unified population and development models
that address not only the demographic transition and contemporary
growth regimes but also the Malthusian regime, which has characterized
much of human history, are essential for a fuller understanding of the
development process. The entire transition analysis allows us a more
complete understanding of the situation with respect to population,
growth and their evolution in the future.
6. Conclusions
94
In the literature analyzed in this paper we attempted to include
the most relevant references on the formal treatment of the problem
of population and growth in a very comprehensive way.
In societies of every type and stage of development, fertility
and mortality are fundamentally associated with the socio-economic
aspects of the modernization process. This process is a result of several
determinants which are analyzed in different theoretical and empirical studies. They include parents’ altruism, intergenerational transfers,
the role of the security system, raising education and health levels,
aiding birth control and distinct incentives which govern intra-family
choices, technological innovation and human capital accumulation.
The Malthusian model was almost abandoned by most of the
recent research on population and growth, but its main legacy, that
higher population tends to reduce per capita income, lives on in the
neoclassical literature through the assumption of diminishing marginal
product for a greater labor supply. From a contemporary point of
view per capita income growth is caused principally by the accumulation of human and physical capital and technological innovation. From
the interaction of these factors and their effects on population growth
there emerges the Malthusian trap and the post-Malthusian regime,
which replace the tendency toward a population explosion with a simiEconômica, nº 3, pp. 75-101, junho 2000
Luis Currais
lar concern for the tendency of a population to implode due to falling
birth rates and an aging population.
Several studies on economic and population growth recognize
the role of longevity in economic growth and have reached a generally
optimistic assessment of the relationship between human capital and
health economics on fertility and longevity through a healthier population. This innovate approach considers mortality as an endogenous
variable and analyses its consequences on morbidity and mortality rates,
thus giving us more complete insights into the relationship between
economic growth, development and longevity.
The ongoing demographic transition in several developing countries with persistent economic growth creates new challenges. Perhaps
the relationship between population and per capita income is far more
complicated than that which is to be found in Malthusian, neoclassical
or endogenous-growth models. In certain economies with small agricultural sector the increase in density that comes with higher population
and greater urbanization promotes specialization, greater investment
in human capital, and the rapid accumulation of knew knowledge.
Under these conditions higher rates of return due to knowledge accumulation are likely to be more important than diminishing returns in
constrained sectors. These facts would increase the cost of having children as compared with investing more in each child. Thus, the
demographic transition toward smaller families may be stimulated by
an initial growth in population.
Over the last few years the literature on population has been
evolving into a comprehensive dynamic framework where population,
development and growth are determined endogenously and simultaneously. The development process and the demographic transition have
been treated as a single unified model, capable of explaining both growth
and stagnation in output and population. The direction of the changes
in population and economic growth are the consequence of shifts in
the initial conditions or basic parameters of the model, rather than as
a result of changes in demographic variables. The explanation of the
complete transition should allow us to better understand the phenomEconômica, nº 3,pp. 75-101, junho 2000
95
From the Malthusian regime to the demographic transition
96
ena related to population and growth, its consequences, the prediction
of future trends and the effects of policy intervention. This, then, constitutes the thrust of current literature at the cutting edge of population
and development research.
Possible extensions to this literature might provide further insights into demographic change, both theoretically and empirically.
For instance the consideration of a model with endogenous population and growth based on heterogeneous rather than homogeneous
agents would overcome one of the limitations of the present models.
It would be a more plausible framework, which would allow us to
study different patterns of fertility, longevity and income growth across
economies and families. Another extension to the model might be the
study of the implications of birth control in developing countries. How
government intervention through contraception, abortion and legality would affect the society’s wealth and welfare. The re-examination
of the impact of legalizing abortion, which is being carried out progressively in some developed countries, and the effects of public medical
care programs, such as the Medicaid funding available in the United
States for those of low income groups, would be another important
line of research.
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