Revisiting an Old Issue: Does Population Matter?

Ernesto M. Pernia, Ph.D., is Professor of Economics, University of the Philippines, and formerly Lead Economist, Asian Development Bank. This piece was published in the Yellow Pad column of Business World, 19 July 2004 edition.

To this day, the issue of why and how population matters remains
crucial for this country. Given its soft state and hard church, the
Philippines has neglected the population problem, practically just
sweeping it under the rug. Consequently, it now finds itself virtually
alone among middle-income developing countries as not having made any
significant demographic transition. And it finds itself having to
debate an issue that is passé for most of developing Asia, including
such less developed countries as Bangladesh and India.

The demographic factor and the poverty challenge

The single most important challenge for the Philippines has been and
continues to be high poverty incidence. Meeting this challenge has been
a tall order, given the low and erratic growth rates of the economy for
the past two to three decades. In the other East and Southeast Asian
economies, sharp reductions in poverty have occurred as a consequence
of rapid and sustained growth, attributable to sound economic policies
coupled with strong population policy. These countries have been
benefiting from a “demographic bonus” resulting from sharp increases in
the share of workers (population aged 15-64) relative to young
dependents (ages 0-14), while the Philippines continues to be burdened
by a “demographic onus”, or simply put, a continuing large share of
young dependents relative to workers.

In 2001, David Dollar and Art Kraay conducted an analysis of
cross-country data involving some 123 countries and showed a one-to-one
relationship between economic growth and income increase for the
poorest quintile of the population. Our own more recent research using
sub-national (provincial- or district-level) data finds that the
growth-poverty nexus is less than a one-to-one correspondence for
individual countries like Indonesia (0.7) and the Philippines (0.55),
though higher than 1.0 for Vietnam. Altogether, these results provide
robust empirical evidence on the common observation that economic
growth is key to poverty reduction. The less-than-one coefficients
indicate that poverty reduction could be further hastened or reinforced
by addressing other factors that improve the well-being of the poor via
income distribution. Among the critical ones are rural infrastructure,
human capital investment, agricultural price incentives, and agrarian
reform.

In the Philippine case, which has among the highest fertility in all of
Asia, it can be further argued that dealing with the demographic factor
will have a direct positive effect on the poor’s welfare apart from the
indirect effect via economic growth. The lack of a clear and consistent
population policy starkly sets the Philippines apart from the rest of
East and Southeast Asia and partly explains its anemic economic growth
and persistent mass poverty. Some observers may point to problems of
poor governance, corruption and political economy, or to exogenous
shocks brought about by trade liberalization and WTO rules as the
culprit. The counterargument, however, is that these problems or
circumstances have also beset or affected the other Asian economies.
And so the question remains — why have they consistently performed
better than the Philippines?

Towards an effective population policy

What are the key proximate objectives and instruments of an effective
population policy for the Philippines? Research by Herrin and Pernia
(2003) suggests three.

  • The first is to reduce unwanted fertility (or meet unmet needs
    for contraception) through a strong national family planning program,
    i.e., one that includes both traditional (“natural”) and modern
    (“artificial”) methods of contraception.
  • The second is to change the preference for large family size
    through an incentive structure that raises the investment per child and
    lowers the demand for children (e.g., through compulsory quality basic
    education, gender equality, and employment opportunities for women).
  • And the third is to reduce population momentum through promoting
    later age at marriage, later childbearing, and wider birth spacing,
    made possible by a responsive family planning program. These measures
    would need to be backed up by appropriate policy reforms in the
    economic and social sectors.

Further measures to help improve the welfare of the poor, as indicated
by our research, include investments in infrastructure and human
capital that directly benefit the poor, and agricultural price
incentives and other food productivity-enhancing programs that are
likely to favor poor households.

Concluding note

The country’s average per capita income and labor productivity today
are at the same levels as in the early 1980s. Why is this so?
Population does matter. It matters to the question whether we will
remain in a low-level equilibrium trap or get out of it. A low-level
equilibrium trap simply means a chain of low economic growth, high
unemployment, low productivity, persistent poverty, depleting human
capital, and high fertility feeding back into low economic growth, high
unemployment, low productivity, persistent poverty, and so on and so
forth. A clear and consistent population policy, matched by an
adequately funded action program, is needed to break this vicious
circle.

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