Population as Public Interest A revisit once more

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1 Population as Public Interest A revisit once more Ernesto M. Pernia U. P. School of Economics September 2007

2 Introduction Contents Theoretical underpinnings Demographic trends macro and micro Population, economic growth and poverty Fertility and poverty Access to FP services Rationale for national population policy Conclusion

3 A great puzzle why the population issue remains unresolved! Majority of adult Filipinos regard rapid population growth as hindrance to economic development, requiring policy intervention. But government appears immobilized owing to opposition from Catholic Church hierarchy and other conservative religious groups. Yet based on surveys, the influence of the Church on fate of political leaders seems highly overrated: surveys say dominant majority of people favor politicians who support FP programs. Hard Church and soft State (horrible combination!) at root of RP s inability to achieve demographic transition cum economic development. Is ideology winning over science?

4 Negative externalities of sustained high feritlity and rapid population growth (RPG) Economic growth: RPG constrains investments in physical and human capital low productivity, hence, social cost of slow economic growth & poverty reduction. Environment: RPG strains the environment, incl. sources (forests, water) and sinks (air that s polluted) climate change, though developed countries contribute more to global climate change.

5 Negative externalities (cont d) Poverty and inequality: RPG raises supply of labor relative to land and physical capital lower wages (esp. for less skilled), hence, greater inequality and poverty. Poverty headcount falls 33% with 5/1000 drop in crude birth rate (Eastwood and Lipton 1999). Inequality also linked to reforms as their success depends on whether or not their costs are unduly borne by the poor and benefits are widely shared. Further, inequality affects economic growth directly.

6 Contrarian views Foremost was Julian Simon s in The Economics of Population Growth (1977), and subsequent books (1981; 1986) underscoring positive externalities. Traditional views: production, consumption and old-age security utilities of children; and insurance against low survival probability of children. Some economists also argue that the negative growth externality should not be of concern, as parents may be fully aware of private and social costs of children, yet would prefer more children to higher consumption of goods; hence, RPG may be socially optimal (R. D. Lee 1991).

7 Contrarian views (cont d) To bemoan parental preference for children to goods consumption would be like bemoaning people s preference not to work on Sundays because it reduces their incomes (P. Demeny 1972). UPSE Discussion Paper 0415 Population and Poverty: The Real Score (2004) catalogues principal studies on population, economic growth and poverty.

8 Demographic trends Macro trends: population growth RP s population growth declined slowly from 3.0% per annum in early 1970s to 2.5% in mid-1980s, then leveling to 2.36% in 1990s through 2000 (no Census in 2005). (Gov t claims this has already fallen to 1.95% based on extrapolation.) Thailand s and Indonesia s population growth similar to RP s in early 1970s now down to 0.9% and 1.3%.

9 Fertility trends Household-level: fertility trends RP s total fertility rate (TFR) also declined slowly from 6.0 children per woman in 1973 to 4.1 in 1993, then to 3.5 in Thailand s and Indonesia s TFRs about the same level as RP s in early 1970s currently 1.9 and 2.3, respectively. Indonesia with lower per capita income and literacy reduced fertility faster than RP. Similarly, Bangladesh, Sri Lanka, Vietnam, and India.

10 Table A. Selected Asian Countries Population Poverty Annual growth rate (%) Fertility 2005 % below poverty line 2004 National 2004 PPP $/ day 2003 % share of the poorest quintile in national income or consumption 2002 Bangladesh Indonesia Malaysia Nepal Pakistan Philippines Thailand Vietnam Source: ADB, Basic Statistics 2007 (May 2007

11 Population growth and economic growth In 1970s-80s, pop growth of 2% or higher in poor countries was already considered high and a hindrance to econ growth [NAS 1971; WB 1984) via reduced human capital investment, unfavorable saving and capital-shallowing effects, etc. Echoed more recently by Mapa & Balisacan (2004) and Mapa (2006) who also highlight the demographic dividend from demographic transition (work force rising faster than dependents). Demographic transition must be early and rapid to result in significant dividends (higher saving rate, HRD, productivity, etc.).

12 Population growth and poverty Thailand s poverty incidence down to 9.8% (2002), and Indonesia s to 16.7% (2004). But RP s poverty incidence remains high at 30% (2003) [Table A]. Further, in RP share of bottom quintile in national Y or C is only 5.4%; in Thailand 6.3% and Indonesia 8.4% (2002). These comparisons are suggestive of the links between governance, population policy, and poverty.

13 Population growth and poverty Thailand s case suggests that population policy coupled with (relatively) good governance rapid economic growth and poverty reduction. Mapa & Balisacan (2004) simulations show that, assuming Thailand s population growth trajectory in , RP s per capita Y 22% higher by 2000 and poverty headcount 22% lower (pure demographic effects). Indonesia whose governance and corruption ratings have, until recently, been reportedly worse than RP s implies that population policy by itself can contribute to significant poverty reduction.

14 RP with lowest GDP per capita growth, and no consistent population policy, also with slowest poverty reduction rate Chart 2. GDP per capita growth and poverty reduction, 1990s

15 Fertility and poverty Consistent and close link between poverty incidence and number of children (Table 1). Family size also directly related to likelihood of falling into poverty owing to exogenous shocks (e.g., typhoons, droughts, inflation) [Reyes 2002]. Mean per capita income, expenditure and savings fall monotonically as family size rises (Table 2). Mean education spending per student drops from P5,558 for family size 1 to P682 for family size 9 +; as well, mean health spending per capita falls from P1,700 to P150 (Table 3).

19 Econometric analysis of HH data Clear negative impact of additional child on HH welfare, esp. in low-income HHs (Orbeta 2005a). Adverse impact is regressive, i.e., the poorer the HH, the larger the impact. Association between large family size, poverty incidence, and vulnerability to shocks is robust and persistent.

20 Access to FP services Actual and desired fertility fall consistently from poorest to richest quintile and from no education to higher education. Actual-desired fertility gaps are 2.1 for poorest quintile, 0.9 for middle, and 0.3 for richest quintile (Table 4). Large gap among the poor due to high unmet need for family planning services; hence, low contraceptive prevalence rate (CPR) [Table 5]. Poor mostly depend on government sources for modern (effective) family planning methods. USAID has been phasing out contraceptive supplies; complete pull-out by 2008.

23 Econometric analysis of HH data Demand for additional children is lower among poorer women than richer ones (Orbeta 2005b). Lack of access to FP leads to unwanted pregnancies > induced and illegal abortions, estimated at close to half a million annually ca (Juarez, Cabigon et al. 2005). FP critical to reduction in maternal and child mortality (one of the MDGs).

24 Rationale for population policy and FP Negative externalities Imperfect information: low-income or less educated couples often ill-informed re. health risks of high fertility to both mothers and children. Even those sufficiently informed often have no access to suitable FP services. Women in poor HHs want fewer children than they are having (NDHS). People s views on population issue (Pulse Asia and SWS).

25 National population policy a sine qua non Current gov t s approach is to leave pop policy & FP program to discretion of LGUs. However local gov t leaders wait for directives from top insofar as major policies are concerned, worse population management at local level incentive-incompatible with IRA and political careers, negative spillover effects with people s mobility across LGU boundaries, differences in fiscal resources and technical capabilities among LGUs. Thus, such approach reflects poor governance (UPSE 2004).

26 Role of LGUs FP programs in LGUs could raise both per capita incomes and fiscal resources (Edillon and Abad-Santos 2006). Positive fiscal effect because, though IRA falls due to decline in population share, such loss can be more than compensated for by greater local revenues due to higher per capita incomes. However, this addresses only the incentiveincompatibity problem, not the others, esp. the negative spillovers.

27 Private sector initiatives Lack of national gov t leadership on population policy has spurred various NGO and business sector initiatives. NGOs: FPOP, PCPD, PLCPD, FCF, FFPD, etc. Business sector: MBC, PCCI, FCC, etc. However, despite long history of these initiatives, their impact rather puny relative to the enormity of the problem. Analogy with ca. 400 NGOs, dealing with 1.5M children, that scratch merely 6% of the problem. Hence, national population policy is still the firstbest approach.

28 Conclusion Population issue has been a silent national crisis, not-so-palpable emergency, simply swept under the rug by the government and politicians. Worse, the government has been held at bay by the conservative Catholic Church hierarchy. Central to the issue are the negative externalities of sustained high fertility on economic growth, poverty and inequality, and environment.

29 Conclusion (cont d) These externalities plus the expressed desire of women, esp. in poor HHs, to have fewer children are solid basis for an unambiguous population policy. Population is evidently a public interest issue that the national government must address squarely, opposition from religious groups notwithstanding.

30 Vox populi vox Dei In a situation where the voice from above clashes against the voice of the people, even God has to learn how to compromise. Patricia Evangelista, Sex, lies and the Catholic Church, (Rebel without a Clue, PDI, August 26, 2007)

31 Thank you!

Population as Public Interest

Population as Public Interest Ernesto M. Pernia U. P. School of Economics September 2007 This presentation draws on: Population and Poverty: The Real Score (December 2004), authored by 22 UP School of