From stagnation to growth: Revisiting three historical regimes

This paper explores the role of mortality in the long transition from Malthusian stagnation to sustained economic growth. An endogenous child mortality rate that varies inversely with parents standard of living is added to the framework in Galor and Weil (AER 2000). In our version of the model, the transition from stagnation to growth, triggered by an exogenous shock to technology, comprises a mortality revolution succeeded by a demographic transition.This paper has benefitted from discussions with and suggestions made by KarlGunnar Persson, Christian Schultz, and, particularly, Christian Groth at the University of Copenhagen. I gratefully acknowledge the insightful criticisms of two anonymous referees, and I thank Paula Madsen for English proof-reading. Responsible editor: Alessandro Cigno.     

Evolution of recent economic-demographic modeling: A synthesis

This paper develops a flexible framework for modeling population's role in economic growth by assessing and extending a rendering suggested by several Harvard economists. Our framework includes a ``productivity' model explaining output-per-worker growth and a ``translation' model translating that growth into per-capita terms. We specify a core economic model and several ``enriched' demographic variants that include dependency, size, and density. Regressions using a cross-country panel spanning the period 1960-1995 reveal that combined impacts of demographic change have accounted for approximately 20% of per capita output growth impacts, with larger shares in Asia and Europe. An earlier draft of this paper was presented at a conference on ``Population Change, Labor Market Transition and Economic Development in Asia,' Institute of Economics, Academia Sinica, Taipei, Taiwan, 6–9 December 2002. A pre-publication version of this paper will be presented at a joint conference (by COE/JEPA) entitled ``Towards a new economic paradigm: Declining population growth, labor market transition and economic development under globalization,' held at the Awaji Yumebutai International Conference Center, Kobe, Japan, 17–19 December 2005. We have benefited from comments by Michelle Connolly, Andrew Mason, Pietro Peretto, Warren Sanderson, Alessandro Tarozzi, Jeffrey Williamson, and two anonymous referees. Responsible editor: Junsen Zhang.     

Geography, demography, and early development

This paper explores the role of geography in early development. It presents a model where the odds of survival are higher in geographically favorable regions. In such regions, higher life expectancy prompts parents to devote more of their resources to old-age consumption and enables them to invest relatively more in the quantity and quality of their offspring. Investment in education, together with population growth, helps geographically-favorable economies to attain high levels of a more educated population that is necessary for sustained economic growth. The empirical evidence is generally supportive of the view that geographic attributes influenced regional population levels in Europe and its colonial offshoots around 1500 A.D. and that they affected population levels and educational attainment in low-income countries of the 1990s. For useful comments and suggestions I thank the editor, two anonymous referees, Daron Acemoglu, Ann Carlos, Phil Graves, Naci Mocan, Oded Stark, seminar participants at the University of Colorado at Boulder, the University of Colorado at Denver, and the 2002 Royal Economic Society Annual Conference. I owe a special debt of gratitude to my advisor Herschel Grossman who passed away in October 2004 after leaving his mark on many of us in the profession. The standard disclaimer applies. Responsible editor: Alessandro Cigno.     

Health effects of child work: Evidence from rural Vietnam

We test whether work in childhood impacts on health. We focus on agricultural work, the dominant form of child work worldwide. Data are from the Vietnam Living Standards Survey, 1992–93 and 1997–98. We correct for both unobservable heterogeneity and simultaneity biases. Instruments are land holdings and commune labour market and school quality indicators. We examine three indicators of health: weight-for-age Z-score; reported illness; and, height growth. There is clear evidence of a healthy worker selection effect. We find little evidence of a contemporaneous negative impact of child work on health but, particularly for females, work undertaken during childhood raises the risk of illness up to five years later. For boys, the risk is increasing with the period of time in work. There is no evidence that work impedes the growth of the child. This work was undertaken as part of the Understanding Children's Work project, an inter-agency program between the International Labour Organisation, UNICEF and the World Bank. The views expressed are those of the authors alone and do not reflect positions of the sponsoring organisations. We are grateful to the Government of Vietnam for permission to use the data. We thank two referees for very helpful comments. Responsible editor: Alessandro Cigno.     

Fertility decisions when infant survival is endogenous

There is evidence that fertility is positively correlated with infant mortality, and that a child‘s chance of surviving to maturity increases with the level of nutrition, medical care, etc. received in the early stages of life. By modelling parental decisions as a problem of choice under uncertainty, the paper shows that fertility and infant mortality are most likely to move in opposite directions if, as implicitly assumed by existing economic theories, parents believe that there is nothing they can do to improve the survival chances of their own children. By contrast, if parents realize that those chances improve with the amount they spend for the health, nutrition, etc. of each child that they put into the world, then fertility and infant mortality may move in the same direction. Under such an assumption, the model has the strong policy implication that directly death-reducing public expenditures are most effective, but stimulate population growth, at low levels of development. By contrast, at high levels of development, such expenditures tend to crowd out parental expenditures, and are a factor in fertility decline. Received: 14 October 1996 / Accepted: 28 July 1997     

How does social security affect economic growth? Evidence from cross-country data

This paper investigates how social security interacts with growth and growth determinants (savings, human capital investment, and fertility). Our empirical investigation finds that the estimated coefficient on social security is significantly negative in the fertility equation, insignificant in the saving equation, and significantly positive in the growth and education equations. By contrast, the estimated coefficient on growth is insignificant in the social security equation. The results suggest that social security may indeed be conducive to growth through tipping the trade-off between the number and quality of children toward the latter.All correspondence to Junsen Zhang. We would like to thank the editor, two anonymous referees, Jim Davies, Frank Denton, Se-Jik Kim, and Mike McAleer for helpful comments and suggestions. Any remaining omissions and errors are the authors responsibility. Responsible editor: Alessandro Cigno.     

Social Health Indicators and Economic Growth: Evidence from East Asia and Pacific,Middle East and North Africa,South Asia,and Sub-Saharan Africa

The objective of this study is to empirically investigate a two-way statistical relationship between the social health indicators and economic growth in the context of four major regions of the world i.e., East Asia and Pacific, Middle East and North Africa (MENA), South Asia and Sub-Saharan Africa. To recognize the relationship between the two variables, a time series, co-integration and Granger causality tests have been employed. Aggregate secondary data pertaining to these four regions from 1975 to 2011 on economic growth and social health indicators i.e., infant mortality, child abuse, child poverty, unemployment, weekly wages, health insurance coverage, teenage suicide, teenage drug abuse, high school dropouts, poverty, out-of-pocket health costs, homicides, alcohol related traffic fatalities, food insecurity, income inequality, HIV/AIDS, tuberculosis, basic health units and rural health centers has been used for analysis. This study evaluates four alternative but equally plausible hypotheses, each with different policy implications. These are: (1) social health indicators Granger cause economic growth, (2) economic growth Granger cause social health indicators (the conventional view), (3) There is a bi-directional causality between the two variables and (4) Both variables are causality independent (although highly correlated). The empirical results only moderately support the conventional view that economic growth has significant long run casual effect on social health indicators in East Asia and Pacific, MENA, South Asia and Sub-Saharan Africa. The present study find evident of unidirectional causality running towards economic growth to social health indicators, although, there are some bidirectional causality also exists between the variables. The percentage of unidirectional causality between economic growth and social health indicators is larger than bidirectional or neutrality hypothesis.     

A model of endogenous divorce and endogenous fertility

This paper examines the interaction between decisions on divorce and fertility. The analysis generates two major implications. Firstly, it complements the existing literature on endogenous fertility to explain why population growth and economic growth can be negatively correlated after an economy develops to a certain level. Secondly, it indicates that economic development leads to a simultaneous increase in divorce rates and decrease in fertility rates. Received: 05 February 1999/Accepted: 20 December 1999     

Modeling and Forecasting Mortality With Economic Growth: A Multipopulation Approach

Research on mortality modeling of multiple populations focuses mainly on extrapolating past mortality trends and summarizing these trends by one or more common latent factors. This article proposes a multipopulation stochastic mortality model that uses the explanatory power of economic growth. In particular, we extend the Li and Lee model (Li and Lee 2005) by including economic growth, represented by the real gross domestic product (GDP) per capita, to capture the common mortality trend for a group of populations with similar socioeconomic conditions. We find that our proposed model provides a better in-sample fit and an out-of-sample forecast performance. Moreover, it generates lower (higher) forecasted period life expectancy for countries with high (low) GDP per capita than the Li and Lee model.     

Human capital,technological progress and the demographic transition*

We emphasize the importance to consider components of population growth — fertility and mortality ‐ separately, when modeling the mutual interaction between population and economic growth. Our model implies that two countries with the same population growth will not converge towards the same level of per capita income. The country with the lower level of birth and death rates will be better off in the long run. Introducing a spill over effect of average human capital on total productivity our model implies multiple equilibria as illustrated in Becker el al. (1990) and Strulik (1999). Besides the existence of a low and high level equilibrium ‐ as characterized by low and high levels of per capita output respectively ‐ we show the existence of multiple low level (Malthusian) equilibria. Initial conditions and parameters of technological progress and human capital investment determine whether an economy is capable to escape the low level equilibrium trap and to enjoy sustained economic growth.     

Child mortality and fertility: public vs private education

How does the effect of child mortality reductions on fertility and education vary across educational systems? To answer this question, we develop an overlapping-generations model where altruistic parents care about both the number and human capital of their surviving children. We find that, under a private education system, if income is low initially, the economy converges to a Malthusian stagnation steady state. For a high level of initial income, the economy reaches a growth path in which children’s education rises and fertility decreases with income. In the growth regime under private education, exogenous shocks that lower child mortality are detrimental for growth: fertility increases and education declines. In contrast, under a public education system, the stagnation steady state does not exist, and health improvement shocks are no longer detrimental for growth. We therefore offer a new rationale for the introduction of public education.     

Mothers in an insider-outsider economy: the puzzle of Spain

There is growing evidence that social policies towards mothers have important effects on their labour market behaviour. This article argues that these effects are less important in a Male Breadwinner Regime if there is employment insecurity in the household or if women intend to participate in the long-run. I consider the case of Spain, where the workforce has become polarized between insiders and outsiders and where social policies closely resemble the Male Breadwinner Regime. The results show that Spanish mothers fall into two groups: those who do not withdraw from the labor force after childbirth and those who withdraw and do not re-enter after their children arrive at school age. Entry or re-entry appears related to the husband's employment uncertainty. Married women in an insider household are less likely to be mobile than women in an outsider household.This research was initiated with the financial support from the Bank of Spain (Fondo para Estudios sobre el Mercado de Trabajo) and the CIRIT (Generalitat de Catalunya). An earlier version has been published in Spanish in Adam, 1995 a. I benefited from presentations in the session on Women's Labour Force Transitions in the ESPE ninth annual meeting at Lisbon, in the IESA (CSIC, Madrid) seminar, in the session on European Labour Markets in the IEA meeting at Tunis, and in the IGIER seminar. I thank Namkee Ahn, Siv Gustafsson, John Ermisch, Andrea Ichino, Sergi Jiménez, Dennis Snower, Robert Waldmann and an anonymous referee for comments. My very especial thanks go to my thesis supervisor, John Micklewright, to Gosta Esping-Andersen, John Myles and David Soskice. Responsible editors: Siv S. Gustafsson, John F. Ermisch.     

Learning-by-doing,population pressure,and the theory of demographic transition

The present paper discusses the long-run effects of two interdependent relations between economic and population growth. According to a frequently used formulation of the population-push hypothesis, learning-by-doing effects in production lead to increasing returns to scale and, therefore, to a positive correlation between economic and population growth. In accordance to the theory of demographic transition the population growth rate initially increases with rising income levels and then declines. Regarding this relationship, the existence and stability of a low-income equilibrium and a high-income equilibrium will be shown in a neoclassical growth model. Under plausible conditions a demo-economic transition from the first to the second steady-state takes place. The result yields a meaningful interpretation of the population-push hypothesis, which is consistent with the empirical findings on the correlation between economic and population growth. Received March 8, 1996 / Accepted October 24, 1996     

Fertility,growth and the financing of public education and health

This paper considers the implications of the financing of government services to children when fertility decisions are endogenously determined. In particular, it is shown that when the services are financed by taxation, the equilibrium outcome is biased away from the socially preferred result. The bias results in higher fertility rates and lower economic growth rates than the efficient social optimum. This arises because each household internalizes the benefits, but not the costs of the tax-financed services. We consider alternative methods of financing the public provision of services and find that a combination of taxation and vouchers can eliminate the bias in the equilibrium outcome.We are grateful for comments from Alessandro Cigno and two anonymous referees.     

Alvin Hansen on Economic Progress and Declining Population Growth

The driving forces of economic growth, according to the mainstream of classical economic thinking, are threefold: technological innovations, the opening up of new territories and discovery of new resources, and increase in population. In interaction, in an entrepreneurial market economy, these forces generate growth not only in the aggregate but also per capita. Evidence of their power was seen in the long stretch of rising living standards in the West over the nineteenth century, despite the ups and downs of the business cycle. However, the economic experience of the interwar years, and in particular the Great Depression of the 1930s, suggested that the forces were largely spent and hence that future economic prospects were gravely imperiled. The Keynesian revolution in economics was a response to the evident malfunctioning of the capitalist economic system, although the policy recipes it offered (for increasing demand and investment to levels capable of generating an equilibrium consistent with full employment of productive resources, especially labor) by no means commanded unanimity. The most prominent American contributor to and spokesman for the new line of economic analysis—often called “the American Keynes”—was Alvin H. Hansen (1887–1975), who took up his professorship of political economy at Harvard in 1937, just after the appearance of Keynes's General Theory. In that post, which he held until his retirement in 1956, he was one of the most influential economists of the era as a theorist, policy adviser, and teacher. Hansen interpreted the economic problems of the 1930s not just as the manifestation of a particularly sharp cyclical downturn, but as evidence of secular stagnation caused by the closing of the economic frontier, sluggishness in technological innovation, and, not least, “a drastic decline in population growth.” This “stagnation thesis” is most succinctly set out in his presidential address to the American Economic Association, delivered in Detroit, 28 December 1938, under the title Economic Progress and Declining Population Growth. The address is re‐produced below from the March 1939 issue of the American Economic Review. (The opening paragraphs of the address, and two paragraphs, immediately preceding the closing paragraph, in which Hansen discusses changes in US national income in the 1930s, have been omitted.) Hansen's analysis of the effects of declining population growth in many ways echoes the thesis set out by Keynes in his seminal Galton Lecture delivered to the Eugenics Society in 1937 (reprinted in the Archives section of PDR 4, no. 3): a demographic slowdown decreases opportunities for profitable investments and increases levels of attempted saving, hence pushes the economy toward a low‐growth equilibrium at which resources are underutilized and unemployment is high. Hansen puts special emphasis on demographically induced shifts in the composition of output. He suggests that, beyond its direct positive effect on investment and output, population growth also has an indirect enhancing effect on these factors by facilitating technological progress–contrary to the “older Malthusian view.” In his policy proposals Hansen was more interventionist than Keynes, advocating a more intrusive government role in the economy as a possible means of escaping the vicious cycle of low demand and high unemployment. As to government action to reverse demographic trends seen as deleterious, neither Keynes nor Hansen argued for policies to increase fertility, presumably because they saw them as both inappropriate and, in comparison to remedial economic policy measures, inefficient or unfeasible. The demands of the war economy in the years following Hansen's address took care of the employment problem, and the immediate postwar decades brought the stimuli of pent‐up consumer demand, an outpouring of technological innovations, a reopening of the economic frontier produced by a more liberal trade regime, and, also, an acceleration of population growth. The result was rapid overall economic growth and increasing levels of per capita income. Keynesian demand management played some role in this economic success story: by the end of the 1960s even US President Richard Nixon pronounced himself a Keynesian. But it offered no remedy for the stagflation that eventually followed. The growth‐promoting recipes favored in the last decades of the century (especially in the most successful developing economies) were anything but Keynesian: limited government, fiscal restraint, and globalization. Yet recent and anticipated demographic trends, especially in Europe—notably fertility decline and population aging—make Hansen, once again, interesting reading. Commitments of the modern welfare state for health care, retirement pensions, and job security command wide approval, but they have boosted governments' weight in the economy and made labor markets inflexible, unemployment high, and retirement early—developments that may increasingly impose a brake on economic growth and on improvements of living standards. Reform measures to ease these burdens are, in principle, straightforward, but their immediate social costs are heavy and their rewards are delayed, hence resistance to reform is strong and growing. This is likely to stimulate the search for alternative policies that offer politically more palatable tradeoffs—some of which may turn out to have an unmistakably Hansenian flavor. As to future population trends, Hansen, despite his reference to a “drastic decline in population growth” based on a comparison of nineteenth‐ and twentieth‐century Western demographic change, envisaged a convergence to a stationary population or a tendency toward very slow decrease. Yet some economies are already locked into a demographic pattern that augurs sharper declines and more rapid population aging, enhancing the relevance of the issues posed by Hansen. In Germany, for example, in the absence of immigration, the population between ages 20 and 40 will decline from 21.6 million in 2005 to 16.3 million in 2025—a drop of 23 percent. Over the same time period, the population aged 60 and older will grow from 20.5 million to 25.8 million—an increase of 26 percent. Serious efforts to slow population decline and retard population aging by stimulating fertility would of course add another major burden to government budgets.     

Endogenous fertility,endogenous lifetime and economic growth: the role of child policies

We examine the effects of child policies on both transitional dynamics and long-term demo-economic outcomes in an overlapping-generations neoclassical growth model à la Chakraborty (J Econ Theory 116(1):119–137, 2004) extended with endogenous fertility under the assumption of weak altruism towards children. The government invests in public health, and an individual’s survival probability at the end of youth depends on health expenditure. We show that multiple development regimes can exist. However, poverty or prosperity does not necessarily depend on the initial conditions, since they are the result of how a child policy is designed. A child tax, for example, can be used effectively to enable those economies that were entrapped in poverty to prosper. There is also a long-term welfare-maximising level of the child tax. We show that a child tax can be used to increase capital accumulation, escape from poverty and maximise long-term welfare also when (a) a public pay-as-you-go pension system is in place and (b) the government issues an amount of public debt. Interestingly, there also exists a couple child tax–health tax that can be used to find the second-best optimum optimorum. In addition, we show that results are robust to the inclusion of decisions regarding the child quantity–quality trade-off under the assumption of impure altruism. In particular, there exists a threshold value of the child tax below (resp. above) which child quality spending is unaffordable (resp. affordable) and different scenarios are in existence.     

On human capital formation with exit options

We explore the relationship between economic volatility and human capital formation within a context of migration. We show that increased variability may raise the average educational level of the population even after netting out expected migration. In particular, we demonstrate that this is the case when individuals' abilities and the economy-wide shock are uniformly distributed. We thank Frédéric Docquier, Pascal Lévy-Garboua, Abraham Lioui, and two anonymous referees for their comments. Responsible editor: Alessandro Cigno.     

Demographic transition and economic growth: Empirical evidence from Greece

Over the past decades, due to a combination of declining fertility rates and rising life expectancies, most industrialized countries have experienced aging populations and low numbers of young populations that may pose economic problems in the future. This paper investigates the relationship first between fertility rate and infant mortality rate and second among demographic changes, real wages and real output in Greece over the period 1960–96. When we control for fluctuations in overall economic activity and the labor market on the bivariate relationship between fertility and mortality rates, the evidence suggests that Granger-causation must exist in at least one direction. The results show that in the long run a decrease in infant mortality rates, taking into consideration economic performance and the labor market, causes a reduction in fertility rates. Also, employing the vector error-correction models, the variance decomposition analysis and the impulse response functions, the empirical results support the endogeneity of fertility choice to infant mortality, the labor market and the growth process. Received: 16 May 1999/Accepted: 18 September 2000     

Child Mortality and Environment in Developing Countries

This paper studies child mortality and fertility in 61 developing countries including the Central Asian Republics (CARs). To control for simultaneity, an estimated value of fertility was used in the mortality equation and a final specification included only exogenous socio-economic, health and environmental variables. We confirm the importance of female literacy in explaining both fertility and mortality, and also find a measure of consumption for the poorest share of the population to be significant, while controlling for nutrition, health expenditure, and income distribution. Incidence of tuberculosis and female agricultural population proxy for environmental impacts, but in spite of these controls, approximately 41% additional mortality was estimated due to living in the CARs. The results fill gaps in the literature: we use a wider range of socio-economic and environmental health variables than previously in an encompassing analysis of mortality and fertility, and find evidence of excessive mortality in the CARs most likely linked to environmental degradation in the region.