Population Growth and

Economic Development
ECO 631: Development Economics LW 8


Chapter 9 of Debraj Ray (2003)
 Population: Some Basic Issues/
Concepts
! Population and development (per capita income & distribution) are
intertwined:



The process of development has spurred (or retarded) population
growth; &



Importantly, population growth in turn has affected economic
growth

• Patterns of population across different countries differ

• Demographic transitions
 Population: Some Basic Issues/
Concepts
• Birth rates, death rates & population growth 


• Age distributions: Developing countries are relatively

young

• Carrying capacity


• Malthusian (1798) grim retribution of Nature

 From Eco Development to Pop Growth

The demographic transition:

• First phase of demographic history: High birth
rates and high death rates
• Second phase of demographic history: High birth
rates (due to inertia in fertility choices) with low
death rates
• Third and final phase of demographic history:
Low birth rates (overcoming the fertility inertia)
with low death rates; ageing population
 From Eco Development to Pop Growth

Historical trends in developed and developing

countries
• Developed countries have gone through
demographic transition which developing
countries are going through albeit at an
accelerated pace 



due to unprecedented advances in medical
science and state of sanitation & hygienes.
 From Eco Development to Pop Growth
The adjustments of birth rates
• Macro inertia/stickiness: at the level of overall population; age distribution
• Micro inertia/stickiness: at the household level.



Fertility choices and missing institutions (aged-care, social security, etc.) and
markets; 

individuals who lack insurance & old-age security tend to have more children
than otherwise.



Infant mortality, etc. and fertility choices.



Gender bias.



To summarise: Information, income & fertility
• Furthermore: Direct and indirect costs of rearing children (Figure 9.1)
 From Eco Development to Pop Growth

Is fertility to high?
• Information and uncertainty
• Externalities (free public education; subsidised
housing or health services); Figure 9.2
• Social norms
 From Pop Growth to Eco Growth

Negative effects argument

• The Malthusian view
• Harrod-Domar growth model:

s/𝜃 = (1 + g*)(1 + n) — (1 — ∂); 

where s is the rate of saving; 𝜃 is the capital-output ratio; g* is the rate of per capita

income growth; n is the rate of population growth; and ∂ is the rate of depreciation. 

Population growth has an unambiguously negative effects on
the rate of growth
 From Pop Growth to Eco Growth

• Swan-Solow growth model

k̇ = sAkα − (n + δ)k
The steady-state growth rate of per capita income is
independent of the rte of population growth; all that matters for
the long-run growth is the rate of technical change

However, increased population growth has negative level

effects
 From Pop Growth to Eco Development

• Population and savings


Faster population growth (with higher dependency ratio) lowers the
aggregate rate of savings
• Population, inequality, and poverty

Faster population growth exacerbates the poverty problem and
worsens inequality
• Population growth and the environment

Public provision of eduction, health and transport services—more
resources used 



Population growth places pressures on land, forest, water, energy
and other natural resources
 From Pop Growth to Eco Development

Positive effects argument

• Effects of population on technical progress:
Demand-side argument: Population,
necessity, and innovation (Green Revolution)
Supply-side argument: Population, diversity
and innovation
Demographic Transitions & Dividends:
Bangladeshi context
The size of Bangladesh population has increased from about 143.8 million in 2009 to 165.6 million in
2019, growing at an average rate of 1.14 per cent a year during the past decade to 2019

The figure that follows shows the age structure of Bangladesh population for 2018, the latest year for
which the data are available.
In 2018, the working-age population ̶ aged between 15 and 65 ̶ is estimated at 108 million, or 67
per cent of the total population.
As such, Bangladesh is going through a ‘demographic transition’, resulting from the declining
mortality rates combined with a fall in fertility rates.
This is inducing a significant change in the age structure of the Bangladeshi population. With
declining population growth, there is a bulge in working-age population with a commensurately
shrinking dependency ratio.
With effective enabling policies and growing job markets, this demographic structural change can
potentially spur faster economic growth popularly known as the demographic dividend.
This demographic dividend can be magnified by enhancing labour force participation particularly
by the female working-age population.
Bangladesh context: Demographic Dividends