Economic development and population
Key terms
Define each term.
Multiple choice
Circle the correct answer.
A country's GDP per capita rises by 5% while its Human Development Index is unchanged. The most likely explanation is:
Which is the main economic concern created by an ageing population?
Worked problems
Show your working.
Comparing two countries on income and on development. Country P has GDP per capita of $9,000, life expectancy of 62 years and a literacy rate of 58%. Country Q has GDP per capita of $8,000, life expectancy of 76 years and a literacy rate of 94%. Compare them, and suggest what might explain the pattern.
Calculating population change and the dependency ratio. A country of 50 million has a birth rate of 28 per thousand, a death rate of 9 per thousand, and net emigration of 100,000 a year. Of its population, 19 million are under 15, 2 million are over 64 and 29 million are aged 15 to 64. Calculate the natural increase, the total population change and the dependency ratio.
Diagrams
Draw two population pyramids side by side, with age bands on the vertical axis and population on the horizontal. Draw one with a wide base narrowing sharply, typical of a country with a high birth rate and lower life expectancy, and one with a narrow base and thick upper bands, typical of an ageing developed economy. Label the dependent groups on each.
Answers
Economic development: An improvement in living standards and the quality of life, including health, education and freedom of choice, rather than an increase in output alone.
B. HDI does include income, but combined with health and education. If growth is concentrated among a wealthy minority and is not translated into better healthcare or schooling for the population, the health and education components do not move and the small income improvement is diluted. This is growth without development.
B. Ageing raises the old-age dependency ratio, so fewer workers fund pensions and healthcare for more retired people, putting pressure on the tax base and on public spending. School places are the concern of a young population, which is the opposite structure.
Step 1. Compare on income. Country P has GDP per capita $1,000 higher, which is about 12.5% more. On income alone, P is the richer country.
Step 2. Compare on health and education. Country Q has life expectancy 14 years higher and literacy 36 percentage points higher. On both non-income dimensions Q is far ahead, and by margins much larger than the income gap.
Step 3. Reach a judgement on development. Q is the more developed country despite being poorer. Its people live longer and are far more likely to be educated, which is what development means. An HDI calculation would place Q above P because the health and education components outweigh the small income advantage.
Step 4. Suggest explanations. Q may spend a larger share of its income on public healthcare and education, and distribute income more evenly so that services reach most of the population. P's higher average may conceal severe inequality, so a small wealthy group raises the mean while most people have little. P's income may also come from a resource industry that employs few people and funds few services.
Step 5. Draw the general lesson. What a country does with its income matters as much as how much it has. This is why development economists look at outcomes such as life expectancy and literacy rather than relying on GDP per capita, which is a mean and says nothing about distribution or public provision.
Questions of this kind reward candidates who reach a clear judgement and justify it, rather than listing the figures. Say which country is more developed and why, then explain the mechanism that could produce the pattern.
Step 1. Calculate the rate of natural increase. 28 - 9 = 19 per thousand, which is 1.9% a year.
Step 2. Convert to a number of people. 1.9% of 50 million = 950,000 additional people from natural increase.
Step 3. Adjust for migration. Net emigration of 100,000 reduces the total. 950,000 - 100,000 = 850,000, so the population grows by 850,000, or 1.7%.
Step 4. Calculate the dependency ratio. Dependants = 19m + 2m = 21m. Working age = 29m. Ratio = (21 / 29) x 100 = 72.4.
Step 5. Interpret the figures together. About 72 dependants per 100 workers, and the dependency is overwhelmingly young: 19 million children against 2 million elderly. Combined with 1.7% population growth, real GDP must grow by at least 1.7% just to hold income per head constant. The pressure is on school places and child healthcare now, and on job creation in fifteen years when this cohort reaches working age.
Step 5 is the point of the question. A young dependency structure is a burden now and a potential demographic dividend later, but only if the economy generates enough jobs when that cohort matures. If it does not, the result is high youth unemployment rather than faster growth.
The shapes make the policy difference visible. The wide-based pyramid needs schools, child health services and, in fifteen years, a great many new jobs. The top-heavy one needs pensions, elderly care and either higher productivity, later retirement or immigration to sustain its workforce. Same measure, opposite problems.