EC104 Topic 3

amarjotsidhu's version from 2015-06-06 01:03


Question Answer
Classic demographic transition modelBased on 4 stages: stage 1 - high stationary; stage 2 - early expanding; stage 3 - late expanding; stage 4 - low stationary
Demographic transition - stage 1= high stationaryPre-industrial economy; subsistence economy - malthusian; high birth and death rates which fluctuate; no public health control/knowledge; low age of population (20s); wars and epidemics make population fluctuate; small natural increase in population; high child dependency ratio (parents can only earn so much); e.g. Angola today - 6.1 children per family in 2009, life expectancy of 36
Demographic transition - stage 2 = early expandingdecline in death rate = icnrease in population; no change in fertility rate; McKeown hypothesis; (Szreter) - period from late 1830s to 1875 = pioneering advances in public health activism and legislation (more intervention due to increased accountability of govt, 1832 Cholera epidemic = 1848 public health act) -> improved water systems and sanitation, improvements in housing quality and quantity e.g. ventilationl regulation of milk supply; decline in infant mortality (first 3 decades of 20th century); nutrition, public works, sanitation=decline in mortality in England NW Europe at the end of 19th century; BUT, still high birth rate, delcining death rate as more population lives to middle ages, slightly longer life expectancy
Mckeown hyptohesisreason for decline in mortality in stage 2 = improved nutrition but dismissed as it doesn't consider role of public health and medical interventions
Demographic transition - stage 3 = late expandingcontinued decline of death rate; decline in fertility rate due to - innovations in contraception, increased cost of child-rearing, increase in returns of child quality + no longer need for insurance to old age, contribution to agriculture, 'spares', etc. ; population begins to stabilise; e.g. Brazil 2010
Demographic transition - stage 4 = low stationaryvery low death rates (result of medical innovation); consistent/stable death rates; low, stable fertility rates; stable population - limited growth e.g. 2014 UK- 80.75 years life expectancy; longer life expectancy; higher dependency ratio (size of old population increases)
Stage 5 extension to classic modelnegative replacement ratio (death rate>birth rate) = negative population growth ; decline in mortality of infants continues, slightly declining fertility; but, some debate e.g. rebound in fertility predicted; examples e.g. Japan - 2010
Galor and WeilStage 1: malthusian regime; stage 2/3 - post malthusian regime; stage 4 - modern growth regime
Princeton/European Fertility Study (EFP)Economic and social factors had little influence on fertility; key reasons for fertility decline = process of innovation and diffusion driven by similar attitudes and networks;
EFP methodologyEffects of aggregation - different area boundaries used, administrative areas could be quite large but not all provinces heterogeneous; omitted variables; purely cross-sectional exercises (fertility vs another variable at a single point in time
BeckerUtiltiy function (U) - U=U(n,Z) - n=number of children, Z= other commodities; increase in income raises the number of children demanded but if higher income = rising wages then increased wage may show as a higher opportunity cost of having children (reduction in number of children via substitution effect); evidence supports this view e.g. child labour views, increase in female participation in labour market
Quality/Quantity extension to Necker (Q-Q model)Quality of children = quality of education/healthcare; U=U(n, q, Z) , q=quality of child; MRS between quality and quantity depends on the ratios of fixes costs (for quantity) to variable costs (for quality); substitution effects between quality/quantity greater in Q-Q model; if variable costs of having children e..g delivery costs, increase then the household will substitute away from numbers and toward child quality and Z; sharp fertility declines reflects small changes in economic environment; Princeton school=wrong
Timing of demographic transition in Europefertility decline around 18th-19th century; exceptions e.g. post WWII 'baby boom'; very low fertility for most of Western Europe by 1970s; England experienced it between 1850-1900 (decline in births and life expectancy at birth increased)
Timing og demographic transition elsewhweremost countries outside Europe and North America did not experience fertility declines till after WWII
Demographic transition timing- Asiahappened later than Europe (Except Japan); happened must first (less than 30 years vs. greater than 100 years);
Why did the demographic transition take place faster elsewhere (than Europe)?medical technology much more advanced in mid C20 (exogenous decline in infant mortality); innovations in technology of contraception=cheaper; increase in opportunity cost of childbearing (role of women changes); net increase in returns to child quality; children replaced with private and government savings as a form of life-cycle savings
Difficult in identifying causes of transitionextensive sumultaneity;lots of changes happening during C18-C20 e.g. industrialisation, urbanisation, etc. + data weaknesses
Benefits of using GDP per capita in PPP-terms measurehelps to determine relative value of GDP for local living costs; solves misleading comparisons due to exchange rates
Weaknesses of GDPdoesn't tell us anything about distribution (just an average); doesn't tell us anything about development of an economy; doesn't tell us about quality of life; doesn't tell us about technological progress (which is key as it delivers new goods, drives productivity growth which raises incomes, promotes leisure + better health, improved quality of goods e.g. music); can only compare similar tradable goods (PP-terms); governments fiddle with stats to show wealthier country; countries change rules of statistics e.g. Italy in 2006 included illegal activities = big increase in GDP
HDIcomposite of life expectancy, education, income - equal weighting; index between 0 and 1 formed (nearer 1 = high development); below 0.5 = low development;
HDI weaknessesnot different from income (included GDP/per person PP); arbitrary selection of 3 variables - why not other other things; difference between HDI and real GDP/person only visible in extreme cases e.g. Qatar (1st in terms of GDP but 31st in terms of HDI)p comparisons of literacy = self-reported
Augment GDPmore to development than wealth e.g. standards of living; take into account negative and positive externalities;, happiness, health
Real GDP per capita (Africa vs USA - 2010)Africa= $2,034 ; USA = $29,564
Convergence/Divergence on HDI and GDP/papitadivergence in income GDP/capita between countries; convergence on development due to transferability of health gains (Deaton) e.g. technology, knowledge; life expectancy has almost doubled in all countries over 1885-1985 but HIV/AIDS has removed most of these gains in some countries
HDI (Africa vs USA - 2014)Africa - 0.53 vs USA - 0.914
Unified growth theoriesendogenous growth theories consistent with process of development; many writers see escape from development trap as driven by large shocks
Galor and Weilescape from Malthusian trap - long dynamic process with long periods of gradual change; they emphasis link between returns to human capital and fertility in bringing about industrial revolution; population growth shifts up growth curve and brings about industrial revolution via an acceleration of technological progress
Process of developmentMalthusian stagnation -> escape from trap -> emergence of human capital formation (desire for education + industrial demand for it= significant reduction in fertility ratesn) -> onset of demographic transition -> contemporary era of sustained economic growth -> divergence in income per capita across countries
Education curvetechnological progress itself raises return on human capital -> education is increasing function of growth rate of technolgy + trade off between quality and quantity of children as education is costly
Growth curvetechnological progress is increasing function of previous level of education . growth curve affected by level of labour force and population
Evolution of education and technology: small population0 education and slow technological progress; not enough demand for growth to occur
Evolution of education and technology: moderate population2 steady state equilibria: equilbrium of 0 education and low rate of technological progress + high education and high growth rate also stable
Evolution of education and technology: large populationunique globally stable steady state equilibrium with high levels of education and technological progress
Income and substitution effectspopulation expands with technological progress in standard malthusian way - over time slow growth of population raises technological progress = moderature population regime; income effect (more resources deovted to child rearing)dominates at first (post-Malthusian regime - acceleration of population and per capita income growth); as population growth in the long run moves economy back to subsistence - substitiution efect dominates- economy passes through demographic transition and population growth slows (modern regime) - population continues to growth = high equilibrium is globally stable
Chesnais on mortality in less developed countries since WWIIit has declined in all less developed countries by at least 15 per 1000
Chesnais on countries where there has been no clear decline in fertilitymiddle eastern states e.g. iraw, iran (due to islam); poorer south asian countries e.g. pakistan; indo-chinese countries e.g. vietnam, where political instability has been an obstacle to modernisation
Galor and Weil on 3 growth regimes3 growth regimes = modern growth regime (steady growth in income per capita and technology level); malthusian regime (glacial technological progress and population growth + income per capita constant); post-malthusian regime (income per capita grew but rising income reflected in rising population);
Easterlin on differences in standards of living between countries prior to 1800quite small differences by today's standards but wide differences in technology e.g. China had sophisticated agricultural technologies which failed to raise standard of living beyond subsistence
Galor and Weil on differences between 3 regimeskey event that separates post malthusian and malthusian regimes = acceleration in the pace of technological progress; key event that separates malthusian and post malthusian regimes = demographic transition that followed the industrial revolution
Galor and Weil on disappearance of Malthusian model in long runat sufficiently high level of population, the rate of population induced technological progress is high enough that parents find it optimal to provide children with some human capital which raises technological progress which raises the value of human capital. improved technology -> households can spend more on raising children + relocation of resources to improving child quality
Guinanne on Q-Q modelchild's role as insurance for old age replaced by welfare state
Arnold et al. on value of an extra year of schoolingan additional year of schooling is associated with between 5 and 15% higher earnings across a range of countries
Crafts on income inequality in 20th centurybig divergence between real gdp/person in the richest and poorest countries but HDI gives us a much more optimistic view of development in third world countries
Sen on failure of GNP as a measuredoesn't take into account things such as sex bias; our main concern is not commodity consumption but with functioning (ability to live in accordance with social norms + capabilities to take advantage of opportunities, etc. ) = other stats needed e.g. mortality stats reveal sex bias in India - greater female mortality in India at most age groups