Review questions L5

Question 1

Please describe the 4 stages of the demographic transition.

Answer 1

First stage: high death rates and birth rates –> more or less constant population growth

Second stage: Death rates decline faster than birth rates

Third stage: Birth rates decline faster than death rates

Fouth stage: No population growth dur to equal birth and death rates (but lower point than in the beginning)

In a diagram this evolution has a cigar shaped curves.

(Today: tendency to aging populations, maily in wester countries)

Question 2

2. Please outline and describe the 3 scenarios for how total fertility rates can stay
   above replacement rates.

Answer 2

1. Desire for large families; the more children, the more insurance (of them surviving?)
2. Unwanted children hypothesis –> limited birth control or laws forbidding aborting causes unwanted pregnansies
3. Population momentum: population grows with a percentage each year –> the absolute value of population growth increases

Question 3

Please describe likely causes of the mortality and fertility transitions, respectively
and discuss the sequencing of the transitions

Answer 3

Likely causes of the mortality transition (less child mortality and disease and more aging) are nutritional improvements, which allows people to live longer. Sanitary improvement, which limits deaths from illness. And technology progress, especially development of medicin (a common example is penicilin).

The fertility transition also has several plausible causes:

Theres the quantity/quality tradeoff: acceleration in technology increases return to skilled labor or investments. This provides an incentive to reduce family sizes (i.e. number of children) while increasing the “investments” (fx. education) in each child.

Substitution and income effect: it has become more costly to have an extra child, why people started substituting away from getting more children, leading to a decrase i birth rates. At low levels of income the income effect dominates, while the substitution effect dominates at high income levels.

With declining mortality rates, people live longer and have a larger time period to get children, so they are not so much i a hurry to reproduce.

Histroically the mortality transition occured before the fertility transition, but there is no evidence that the mortality transition induced the fertility transition.

Question 4

Outline the basic ideas of population pessimists versus population optimists

Answer 4

Pessimists believe that population growth may reduce economic growth, because of capital dilution. So, simply having to share the capital across more people will decrease the capital per capita and hence growth.

Optimists believe that population growth may increase for economic growth, through division of labor (Adam Smith), technology adoption in the presence of population pressure , and also the mechanism that more people lead to more (good) ideas, which can enhance economic growth.

Question 5

Outline the likely estimation biases faced when analyzing the relationship between
population growth and income

Answer 5

When estimating the relation between population growth and income there are several endogenity problems:
(Slower) population growth may be caused by higher mortality or lower fertility - here it is hard to determine causality.
Antoher aspect is reverse causality or simultaneity bias: fertility is possibly influenced by income. Another issue is ommited variable bias in terms of being poor might lead to populatin growth.

Question 6

Describe using a Solow model framework how migration is likely to influence
capital accumulation (including the underlying assumptions). Consider both the
case where migration is “just” influencing population growth (n) as compared to
the situation where migrants is assumed to bring productive capital

Answer 6

Considering the case where migration does not bring any productive capital, the migration will “just” contribute to a change in labor force (whether it is positive or negative depends on the perspective: immigration emigration). In case of immigration, a larger labor force will entail a larger output because of larger total accumulation of capital i future periods, given a constant savings rate.

Considering the case of migration bringing productive capital, the migration will contribute to both labor force and capital accumulation. Whether the contrinution is positive or negative depends on the quality of the productive capital the migrants bring with them. If their productive capital is lower than the host country there is a negative contribution and postive contribution if the productive capital brought in is greater than in the host country.

Question 7

Outline the 4 important questions to ask when evaluating traditional migration
models against empirical evidence?

Answer 7

1. What are the external effects of (especially skilled) emigrants’ departure on the productivity of non-emigrants? - this is also called brain drain.
2. What is the elasticity of labor demand, in the origin and destination countries?
3. How much of international differences in productivity depend on wokers’ inherent traits - accompanying them when they move - and how much depends on their surroundings?
4. Given the many barriers that prevent emigration today what future level emigration is feasible?