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Capturing the Demographic Bonus in Ethiopia. Luc Christiaensen and John May HNP BBL Presentation at the World Bank - November 14, 2007. Central Theses. Accelerating the demographic transition in poor countries yields faster income growth and poverty reduction.

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capturing the demographic bonus in ethiopia

Capturing the Demographic Bonus in Ethiopia

Luc Christiaensen and John May

HNP BBL Presentation at the World Bank - November 14, 2007

central theses
Central Theses
  • Accelerating the demographic transition in poor countries yields faster income growth and poverty reduction.
  • To do so, there are important pay-offs at the margin from complementing gender equitable development with demographic actions such as family planning.
rapid population growth slows economic growth
Rapid population growth slows economic growth
  • Rapid population growth (declining mortality) results in :
    • higher dependency ratios/lower savings
    • increasing demand for public investment in social services (health, education) at the expense of investment in productive goods and services (infrastructure)
    • changing land/labor and capital/labor ratios affecting productivity

 Slower economic growth

  • Malthusian and Boserupian responses (both in Ethiopia)
followed by fertility decline it spurs economic growth
Followed by fertility decline, it spurs economic growth
  • When rapid population growth is followed by a decline in fertility:
    • dependency ratios decline, the share of working age population increases, and so do savings and private investment
    • Reduced public spending on social services frees up resources for public investment in productive goods and services (infrastructure)
  • This induces more rapid economic growth, the “demographic bonus.”
the demographic bonus
The demographic bonus
  • can be large
  • is NOT automatic
  • is larger, the faster the fertility transition.

How much is the gain in Ethiopia and how to accelerate the fertility transition?

ethiopia a demographic giant
Ethiopia - a demographic giant …
  • Size:
    • 78 million people, 2nd largest population in SSA, after Nigeria
  • Speed:
    • growing at 2.5 % resulting in 2 million people added per year;
  • Structure:
    • high dependency ratios (83+3)/100
    • youth bulge (50% between 15-29 yrs old)
  • Space:
    • young population largely concentrated in the rural Highlands (15% urban)
    • Increasing land pressure and environmental degradation
      • landholdings per rural person more than halved since late 1960s
      • Inorganic fertilizer added equals amount removed
      • Resettlement

Chapter 1

at the brink of its fertility transition
… at the brink of its fertility transition
  • Annual population growth has declined from 3% in 1990 to 2.5% in 2005
  • U5MR (123/1,000 in 2005) continues to decrease and fertility started to decline as well (5.7 children per woman in 2005)
  • Marriage at early age is slowly declining, from 65% of the married women being married by age 18 in 2000 to 61.8% in 2005
  • The contraceptive prevalence rate increased from 8.1% in 2000 to 14.7% in 2005, but at 34% unmet demand remains high
drivers of mortality changes
Drivers of Mortality Changes
  • IMR and CMR are the main drivers of changes in CDR
    • Further reduction in child mortality will substantially reduce the CDR and thus foster population growth.
    • Female education, clean water access, being Muslim have major effects on CMR
  • The maternal mortality ratio is very high (673/100,000 live births in 2005), though the anticipated decline to reach the MDGs is unlikely to substantially affect the CDR or population growth
  • HIV/AIDS is unlikely to substantially affect CDR when maintained at the current levels
drivers of fertility changes
Drivers of Fertility Changes
  • Female education: key socio-economic variable
  • Income effect: doubling household income associated with 1-1.5 fewer children on average
  • FP Knowledge among women in communities
  • Empowerment: Women in communities where women earn cash income have fewer children
  • Access to family planning services
    • Literature: lifetime exposure to FP reduces TFR by 0.5 to 1.5 child per women
    • Similar order of magnitudes found in Ethiopia
population projections scenarios
Population Projections Scenarios
  • Reaching PASDEP with high FP
    • low fertility: TFR from 5.9 to 2.94
    • low mortality: U5MR from 166 in 2000 to 50 in 2030
    • Corresponds to UN Medium Variant
    • Assumes high family planning - CPR grows at 1.32% per year
  • Reaching PASDEP
    • high fertility: TFR from 5.9 to 3.65 in 2030
    • high mortality: U5MR from 166 to 76 in 2030
    • Corresponds to UN high variant
    • Assumes lower FP expansion - CPR grows at 0.9%/year

Both scenarios have same assumptions regarding mortality and fertility effects of HIV/AIDS

macro effects of population growth
Macro Effects of Population Growth
  • GDP growth depends on factor accumulation (labor, capital, land) and TFP growth.
  • Lower population growth (following more spending on family planning) may influence growth and poverty reduction through:
    • Composition of public expenditures (skills/capital)
    • Labor market
    • Total factor productivity
  • MAMS- Maquette for MDG Simulations
    • a dynamic economy-wide model of Ethiopia run from 2005-2030
    • earlier used to analyze scenarios to reach the MDGs and to develop poverty reduction strategies.
the powers of mams
The powers of MAMS
  • Public spending
    • Ethiopia specific production and cost functions of social services
    • Family planning explicitly accounted for
    • Other public infrastructure (roads and energy) and other government
    • Government and country operate under budget constraints, closed either through government borrowing or direct taxationtrade-offs are explicit
  • Labor market
    • Three types of labor (unskilled, semi-skilled, skilled)
    • Labor markets clear through wage adaptation for each labor category; unemployment is implicit—only a share of those entering the labor market are employed, this ratio is fixed over time
  • TFP growth is assumed independent of population growth
  • Population growth enters exogenously, but consistent with observed behavior
  • Tool for comparing welfare effects of different population growth scenarios and thus cost-benefit analysis of more rapid FP expansion
simulation assumptions
Simulation assumptions
  • Scenarios simulated with MAMS for the period 2005-2030:
    • (1) Higher pop growth with low spending on FP; government budget balanced through changes in direct taxes or domestic govt borrowing
    • (2) Lower pop growth with higher FP spending (52 million US$ in 2030)
  • Population projections:
    • Exogenous paths for total population and cohorts entering the first year of primary school and the labor force;
    • High population growth scenario has a higher dependency ratio and a smaller population share in working age.
  • The different scenarios are identical in terms of:
    • Educational quality (resources per student)
    • Health indicators
    • Access to safe water and sanitation (MDGs 7a and 7b)
    • Government per-capita spending in other areas.
    • Aid and other inflows from the rest of the world.
development is the best contraceptive but contraceptives are good for development
Development is the Best Contraceptive, but Contraceptives are Good for Development
  • Fostering female education and empowerment is quantitatively the most important entry point  about 75% of the simulated decline in TFR induced by gender equitable development
  • Especially more rapid family planning expansion provides substantial complementary benefits at low cost  0.5-1.5 reduction in TFR following lifelong FP exposure
  • But also gains from promoting a more enabling population policy environment (political commitment, sustained government financing, proper institutional arrangements, and better M&E)
demand for contraceptives is high
Demand for contraceptives is high
  • Unmet needs for FP are still great: 34% of married women have expressed an interest in 2005
  • The growing use of FP has barely kept up with the increasing demand (unmet demand in 2000 estimated at 36%)

 Improving access to contraceptives, while continuing IEC and BCC services

expanding coverage of family planning services to remote rural areas
Expanding coverage of family planning services to remote rural areas
  • The MOH intends to deploy 30,000 Health Extension Workers (HEWs)
  • Engaging the private sector and NGOs (abolishment of taxation on contraceptives)
  • Linking HIV/AIDS and FP/RH services
  • CBRH agents (compensation)
improving availability of contraceptives at existing distribution points
Improving availability of contraceptives at existing distribution points
  • Implementing a new supply-chain system (coordination/consultation of regions, provision of basic logistics in local warehouses, logistics typically not or poorly funded (govt or donors)
  • Initiating long-term planning for financing contraceptives, at all levels
improving quality of family planning
Improving quality of family planning
  • Expand the range of contraceptives available, including long term
  • Recruitment, training and deployment of qualified health personnel
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