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Population, Fertility, and Welfare

Paper Session

Friday, Jan. 3, 2025 10:15 AM - 12:15 PM (PST)

Hilton San Francisco Union Square, Franciscan C
Hosted By: American Economic Association
  • Chair: Chad Jones, Stanford University

Population and Welfare: Measuring Growth when Life is Worth Living

Mohamad Adhami
,
Stanford University
Mark Bils
,
University of Rochester
Chad Jones
,
Stanford University
Peter Klenow
,
Stanford University

Abstract

Economic growth is typically measured in per capita terms. But social welfare should arguably include the number of people as well as their standard of living. We decompose social welfare growth --- measured in consumption-equivalent (CE) units --- into contributions from rising population and rising per capita consumption. Because of diminishing marginal utility from consumption, population growth is scaled up by a value-of-life factor that exceeds one and empirically averages nearly 3 across countries since 1960. Population increases are therefore a major contributor, and CE welfare growth around the world averages more than 6\% per year since 1960 as opposed to 2\% per year for consumption growth. Countries such as Mexico and South Africa rise sharply in the growth rankings, whereas China, Germany, and Japan plummet. These results are robust to incorporating time use and fertility decisions using data from the U.S., Mexico, the Netherlands, Japan, South Africa, and South Korea. Falling parental utility from having fewer kids is roughly offset by increases in the ``quality'' of kids associated with rising time investment per child.

A Neoclassical Theory of Population

Juan Carlos Cordoba
,
Iowa State University
Xiying Liu
,
Wuhan University
Marla Ripoll
,
University of Pittsburgh

Abstract

Malthus’ theory predicted a robust long-run dichotomy: a strong positive correlation between land size and population, while showing no correlation between per-capita income and land size or land-augmenting technology. We document that these two predictions remain largely valid for modern times. However, Malthus’ theory fails to account for modern economic growth. This paper provides a theory of endogenous population consistent with these stylized facts, the dichotomy, and modern economic growth. Our theory extends the Barro-Becker model to include a fixed factor, land, and suitable substitutability between land and capital. In contrast with prevailing models of fertility, our model yields testable predictions for population levels based on effective land measures—measures that include land and land-augmenting technology. We construct effective land measures for a cross-section of countries for 2015 and validate the predictions of our model. Our model rationalizes the transition from stagnation to growth as one of switching from land to labor-augmenting technological progress. It predicts non-monotonic transitional dynamics, implying that transformative events, such as industrial revolutions, may precipitate population explosions followed by a transient implosion, consistent with empirical evidence from several countries. Finally, laissez-faire is socially optimal both before and after the onset of economic growth.

Asymmetric Fertility Elasticities

Sam Engle
,
University of Exeter
Chong Pang
,
University of Hong Kong
Anson Zhou
,
University of Hong Kong

Abstract

Many governments around the world struggle with below-replacement fertility rates. Using historical data, we document that fertility is more responsive to anti-fertility policies than to pro-fertility ones. While canonical models with smooth Marshallian demand have difficulty explaining this phenomenon, we show that the asymmetry is consistent with a theory of fertility choice under reference-dependent preferences. In a dynamic economy where the reference point is endogenously formed, the theory offers a ``slippery slope'' perspective: fertility rates could fall even when the underlying economic fundamentals remain unchanged. Complementary to existing studies, our framework provides a new angle to interpret the recent global fertility decline. It also suggests that governments concerned with population externalities have a precautionary motive to set a higher fertility rate target than previously thought.
JEL Classifications
  • E0 - General
  • J1 - Demographic Economics