Demographic Transition

1. Demographic Transition UBC - Econ 334 Mauricio Drelichman

2. Last lecture recap The Industrial Revolution again Evolution of efficiency Rewards to innovation Culture and supply of innovation Timing of the IR Pomeranz and the Great Divergence Asia vs. Europe Malthusian constraint Reproductive advantage of rich

3. Bibliography Murphy, T. E., �Old Habits Die Hard�, MIMEO Other: Galor, O. and D. Weil [1999]; �From Malthusian Stagnation to Modern Economic growth,� AER Kirk, D. [1996]; �Demographic Transition Theory,� Population Studies

4. The big question Most of human history was marked by (Malthusian) stagnation in economic terms Minimal technological progress and population growth The last two centuries experienced a completely different pattern: First, an escape from the Malthusian trap� ...and then growth of income per capita and population

5. 5 Humanity�s history in one picture

6. Malthusian Trap What accounts for the epoch of stagnation that characterized most of human history? Why had episodes of technological progress in the pre-industrialization era failed to generate sustained economic growth? Why has population growth counterbalanced the expansion of resources per capita that could have been generated by technological progress?

7. The Transition What is the origin of the sudden spurt in growth rates of output per capita and population? What triggered the demographic transition? Would the transition to a state of sustained economic growth have been feasible without the demographic transition?

8. Great divergence What accounts for the sudden take-off from stagnation to growth in some countries and the persistent stagnation in others? Why has the positive link between income and population growth reversed its course in some economies but not in others? Why have the differences in per capita income across countries increased so markedly in the last two centuries?

9. Understanding humanity�s history Persistence of (low) standards of living Malthusian models, many tested for Britain [e.g. Lee, 1973 & 1997; Bailey & Chambers, 1993] some also for the rest of Europe [e.g. Weir, 1984; Galloway, 1988] Industrial revolution and demographic transition Enclosures [e.g. McCloskey, 1972], enlightenment [e.g. Mokyr, 2002], democratic institutions [e.g. North & Weingast, 1989], trade [e.g. Acemoglu et al., 2005], etc Demographic transition theory [e.g. Notestein, 1945], fertility choice models [e.g. Becker, 1960], etc. Modern economic growth Neoclassical models [e.g. Solow, 1956], endogenous growth models [e.g. Romer, 1990], etc.

10. Unified Growth Theory Can a single growth model incorporate the basic stylised facts of the history of humanity? Einstein�s dream of a �Theory of Everything� Galor and Weil [1999] were among the first to suggest a model that incorporates micro-foundations of the growth process and is capable of capturing the long-run historic evolution: Malthusian stagnation and modern growth� ... but also transition from one regime to the other, and the �Great divergence�

12. Unified Growth basic story �[This unified growth model] encompasses the endogenous transition between three regimes that have characterized economic development [...] evolves from a Malthusian regime, where technological progress is slow and population growth prevents any sustained rise in income per capita, into a Post-Malthusian regime, where technological progress rises and population growth absorbs only part of output growth [...] a demographic transition reverses the positive relationship between income and population growth, and the economy enters a Modern Growth regime with reduced population growth and sustained income growth� Abstract to the seminal paper by Galor and Weil [2000]

13. Deconstructing the basic story Malthusian period characterised most human history: technological progress and population growth insignificant for modern standards In the post-Malthusian regime the pace of technological change speeds up in association with increased industrialisation, promoting a take-off from the Malthusian trap Acceleration of technological change and interaction with human capital formation prompted a demographic transition that fed-back into the growth process

14. Pre-industrial economy Many growth models assume that in pre-1800 societies growth was largely absent and some economic historians actually support this [e.g. Clark, 2007] This might be tremendous simplification� Were standard of living during the Norman Conquest and the Glorious revolution comparable? ...but it seems the case that the nature of growth was caught in some sort of dead end When growth took place, it typically seems to have led to forces that eliminated it

15. Malthusian model recap The pre-1800 period is identified by at least two characteristics: Taking aside exogenous shocks, population dynamics were dominated by changed in income per capita Diminishing labour productivity makes the relationship between income per capita and population was negative, perpetuating the former at subsistence level How do economists think about this Malthusian model?

16. (Neo-)Malthusian dynamics

17. (Neo-)Malthusian dynamics

18. (Neo-)Malthusian dynamics

19. (Neo-)Malthusian dynamics

20. (Neo-)Malthusian dynamics

21. (Neo-)Malthusian dynamics

22. (Neo-)Malthusian dynamics

23. (Neo-)Malthusian dynamics

24. Historical evidence Is the Malthusian model a good characterisation of pre-modern era? The long-run stability in income per capita in Clark�s graph partly suggests it is Some data on population and real wages points to similar conclusions More sophisticated research is less conclusive, but in many respects tends to supports the Malthusian hypotheses [e.g. Lee, 1973; Galloway, 1988; Bailey & Chambers, 1993; Kelly, 2005; etc] The effect of income on vital rates, also seem to go in the same direction

25. Back to unified models... As in the standard Malthusian, in unified growth models the size of population is self-equilibrating When technology remains static, population increases end up driving down wages� �but sufficiently large technological change will allow wages to rise above the constraints Technology progress raises the return to human capital and parents switch from quantity to quality

26. The Post-Malthusian period Rapidly increasing technology Improved households budget constraint (so parents can have more children) Further promotes reallocation from quantity to quality of children (so parents have less children) When the first effect dominates the second population rises together with output �Post-Malthusian� Associated with the Industrial revolution

27. Explaining the industrial revolution Take-off from Malthusian stagnation is then associated with industrialisation and urbanisation Which models we have then to understand what drove the Industrial Revolution? Events outside the economic system (e.g. change in political institutions) Shock moving the economy to a new dynamic equilibrium (e.g. �discovery� of America) Product of gradual evolution, making growth endogenous (was the Revolution inevitable?)

28. Human capital formation Post-Malthusian Regime stimulates accumulation of human capital Due to relaxation in budget constraints� ...and increased demand of human capital In the first phase of the Industrial Revolution human capital has a limited role in the production process In the second phase, however, increased skill requirements boosts the demand for education triggering the last stage

29. Triggering a demographic transition Acceleration of technological change and interaction with human capital formation prompted a demographic transition Here the quantity-quality trade-off dominates Under the new conditions, parents change the way in which they decided the number of children� ...generating a fertility decline� ...accompanied by a mortality decline

30. Entering modern economic growth This demographic transition feeds-back into the growth process: Reducing the dilution of the stock of capital and land Enhancement of investment in human capital Alteration of the age distribution of the population (temporarily rising the proportion of labour force)

31. Assessment of the model How well does unified models fit the available data? Does the demographic story imbedded in this kind of model square with what we know about population dynamics? Do these model encompass the arguments brought up by other, more �partial� models? What other stories can explain the development of human history over such a long period of time?

32. Theories of demographic transition Decline in infant and child mortality Rise in income per capita Rise in demand for human capital Decline in child labour Rise in life expectancy Change in marriage institutions Decline in gender gap

33. Demographic transition theory The role of modernisation Societies that undergo a process of modernisation go through a demographic transition �Stages� theory From high fertility and high mortality� �to low fertility and low mortality Evidence more or less in line BUT� Mechanisms far from clear Not ALL evidence supporting

36. The decline of mortality Epidemiologic transition Infectious (TB, cholera, smallpox, typhus, etc.) to degenerative diseases (cancer, Alzheimer, etc.) Death from young to old Why? Medical improvements Vaccinations, etc Material progress Rise in income per capita and food intake Hygiene and public health WC, sewerage systems, etc Adaptation of humans with their pathogens

38. The decline of fertility Movement from natural fertility to controlled fertility? What you don�t buy of the Malthusian model? What do we need for a fertility transition? �Effective techniques of fertility must be known and available� �Fertility must be within the calculus of conscious choice� �Reduced fertility must be perceived as advantageous�

39. Malthusian and �Modern� Dynamics

40. Old Habits Die Hard Why is the French case interesting? Early onset of the decline and heterogeneity What factors explain different levels of fertility within France in the 19th century? Panel regression to model the correlates of fertility using department level panel data (N= 86, T=5) What do results suggest? Income, educational, and religiosity appear to have an influence on fertility Diffusion effects

43. Looking for an answer Malthusian transition? Malthusian dynamics not rich enough to account for the different factors affecting fertility in the modern world In particular, not helpful in suggesting ideas of what could have triggered the transition Macro/Micro studies Many relevant stories are missed if we aggregate too much Very �micro� studies hard to do Exploiting regional heterogeneity What explains differences within France?

44. Princeton index of marital fertility [Coale & Watkins, 1986]: Bm = Legitimate births Na = Number of women aged a ma = proportion of women married at age a ha = Rate of childbearing of married Hutterites at age a % of births with respect to the maximum biologically attainable given the age structure of married women

48. French diversity Very early in the 19th Century, some regions in France seem to be practicing active family limitation This practise spreads throughout the century, but some strongholds of high fertility remained resistant to change This does not seem to have happened in many other places in Europe (e.g. England)

52. Fertility transition What do we need to have a transition? Conditions for a fertility transition [Coale, 1973] �Effective techniques of fertility must be known and available� �Fertility must be within the calculus of conscious choice� �Reduced fertility must be perceived as advantageous�

53. Thinking about fertility An encompassing view of fertility choice [Easterlin et al., 1980]: N = Natural fertility FC(�) = Fertility control Cn = Potential supply of children (N, child mortality) Cd = Demand for children (income, prices and tastes) RC = Regulation costs (psychic and market costs)

55. Framing the analysis �Effective techniques of fertility must be known and available� [RC < 8] Did couples know the means to control the number of children? Did they have access to these means? �Fertility must be within the calculus of conscious choice� [RC < 8] Did couples choose the number of children they wanted to have? �Reduced fertility must be perceived as advantageous� [Cn-Cd > 0] Why did couples have children?

56. Contraception in XVIII century France Modern ignorance vs. past knowledge Rural societies constantly involve with reproductive matters: breeding of domestic animals essential part of daily activities Sodomy, condoms and sponges Known and used, usually reserved for prostitution Coitus interruptus Widely used (and relatively effective: only 14% of first time users are expected to conceive accidentally) Abortion Increasingly common in the 19th century (Prolonged breastfeeding) Wet-nursing becomes less common Effect reinforced by abstinence [Santow, 1995]

57. Triggering a fertility transition Market costs? [RC < 8?] Discovery / diffusion of contraceptive techniques Many already available Psychic costs? [RC < 8?] Discovery / diffusion of new ideas about family planning French revolution? Political self-determination and individual self-determination Parallel with American democratic revolution? [Binion, 2001] Break with the Catholic church From: �being the gift of God, the child was taken back by God when it pleased Him� [Flandrin, 1979] To: numeracy about children [van de Walle, 1992]

59. Fertility decisions Potential supply of children [Cn] Natural fertility Child/infant mortality Substitute to contraception? [Brown & Guinane, 2002] Demand for children [Cd] - [Becker, 1960; Schultz, 1981] Resources constraints and children as a consumption or investment good Trade-off between quantity and quality Cost of raising children, parents opportunity costs and alternative consumption/investment options

60. General predictions of the models Which factors normally tend to explain a fall in fertility? ? child mortality ? urban / industry (cost of rearing / training) ? financial devices (alternative investment) ? female education (cost opportunity of mother) Which factors tend to give ambiguous results? ? income (are children a normal good? what is the result of the trade-off between quality and quantity?) ? male education (but if ? fertility, less than with female education) Diffusion effects?

61. Testing the hypotheses

67. Main results To some degree, the French fertility transition seems to have followed a known pattern Relevance of some economic and �institutional� variables is partly supported by the data Some characteristics of the educational system appear to have robust results Women literacy and children participation in schools as a key driving force in the transition Secularisation of education (French Revolution?) Did France go through another kind of modernisation?