Economic Development – Population (Cambridge IGCSE 0455 5.3)
Learning objectives
- Explain the effects of increases and decreases in total population size.
- Analyse how changes in the age structure of a population affect the economy.
- Analyse how changes in the gender (sex) structure affect the economy.
- Describe how the birth rate, death rate and net migration influence population size.
- Define optimum population and explain why it matters for development.
- Identify the concept of population momentum and its relevance to demographic change.
1. Key demographic terms & formulas
Birth rate (BR)
Number of live births per 1 000 people in a year.
Formula: BR = (Number of births ÷ Total population) × 1 000
Death rate (DR)
Number of deaths per 1 000 people in a year.
Formula: DR = (Number of deaths ÷ Total population) × 1 000
Net migration (NM)
Difference between the number of immigrants and emigrants per 1 000 population in a year.
Formula: NM = (Immigrants – Emigrants) ÷ Total population × 1 000
Population‑growth rate (PGR)
Overall change in population expressed as a percentage per year.
Formula: PGR = [(Births – Deaths + Net migration) ÷ Total population] × 100
Dependency ratio (DepR)
Measures the pressure on the working‑age population (15‑64).
Formula: DepR = [(Population 0‑14 + Population 65+) ÷ Population 15‑64] × 100
Population momentum
The tendency for a population to continue growing after fertility falls to replacement level because of a large proportion of people in their child‑bearing years.
Optimum population
The size of a population that maximises national welfare (output, living standards and environmental sustainability) given the country’s resources, technology and institutions.
2. Why do birth, death and migration rates differ between countries?
- Economic development – richer countries usually have lower birth rates (access to contraception, higher education) and lower death rates (better health care).
- Health care & nutrition – lower infant mortality and longer life expectancy.
- Cultural & religious norms – some societies value large families, others promote small families.
- Government policies – e.g., China’s former one‑child policy, pro‑natal tax credits in some European states.
- Conflict, war or natural disasters – raise death rates and trigger out‑migration.
- Climate change & environmental stress – can force people to move, altering net migration.
- Education, especially of women – higher female education tends to reduce fertility.
3. Optimum population
An optimum population is not a fixed number; it depends on:
- Availability of natural resources (land, water, minerals).
- Level of technology and labour productivity.
- Infrastructure capacity (housing, transport, schools, hospitals).
- Environmental constraints (pollution, biodiversity, climate).
When a country exceeds its optimum population the marginal productivity of labour falls, unemployment rises and pressure on public services increases. When it is below optimum resources are under‑utilised and potential economic growth is lost.
4. Effects of changes in total population size
4.1 Growing population
| Economic indicator | Likely effect |
|---|
| Labour supply | Increases – can shift the PPF outward if jobs are created. |
| Aggregate demand | Higher consumption of food, housing, education and health services. |
| Unemployment | Risk of rise if job creation lags behind labour growth. |
| Wages | Short‑run downward pressure; may rise later if labour becomes scarce. |
| Public finance | Higher tax receipts but also higher expenditure on infrastructure and social services. |
| Environment | Greater pressure on land, water and energy; possible increase in pollution. |
4.2 Declining population
| Economic indicator | Likely effect |
|---|
| Labour supply | Falls – may shift the PPF leftward. |
| Aggregate demand | Weakens – lower consumption of housing, cars, retail goods. |
| Wages | Upward pressure as firms compete for fewer workers. |
| Public finance | Fewer taxpayers → pressure on pension and health‑care budgets. |
| Automation | Incentive for firms to adopt labour‑saving technology. |
| Capital formation | Higher savings can increase funds for investment, but excess savings may depress returns. |
5. Effects of changes in age structure
5.1 Youth‑heavy population (high youth dependency)
- Dependency ratio rises because a large share of the population (0‑14) is not in the labour force.
- Greater demand for schools, child‑health services and, in the medium term, for jobs.
- Short‑run fiscal pressure on government budgets.
- Potential demographic dividend if the economy can absorb the cohort when it reaches working age.
- Economic indicators: higher public‑sector spending on education, lower per‑capita GDP initially, but possible rapid growth later.
5.2 Ageing population (high elderly dependency)
- Dependency ratio rises because of a larger 65+ cohort.
- Increased demand for pensions, long‑term health care and aged‑care facilities.
- Possible labour shortages, especially in physically demanding or low‑skill occupations.
- Higher national savings can boost capital formation, but consumption may fall, reducing aggregate demand.
- Economic indicators: higher public‑sector spending on health & pensions, upward pressure on interest rates (if borrowing increases), slower growth in labour‑productivity.
6. Effects of changes in gender (sex) structure
6.1 Balanced sex ratio (≈1 : 1)
- Full utilisation of human capital – both men and women can contribute to the labour force.
- Higher household incomes and improved standards of living.
- Diversity can stimulate innovation and productivity.
6.2 Male‑biased ratio (e.g., 1.3 males : 1 female)
- Potential surplus of men in traditionally male‑dominated sectors (construction, mining).
- Social pressures: competition for partners, higher rates of crime or antisocial behaviour.
- Possible under‑utilisation of female talent in education and formal employment.
6.3 Female‑biased ratio (often caused by male out‑migration)
- Women frequently combine paid work with unpaid household responsibilities.
- Can raise female labour‑force participation and empowerment.
- Risk of “feminisation” of low‑skill jobs and downward pressure on wages in those sectors.
- Policy needs: affordable childcare, equal‑pay legislation, protection against exploitation, support for women’s entrepreneurship.
7. Summary table – Economic, social and policy implications
| Change | Key economic effects | Key social effects | Typical policy responses |
|---|
| Population increase | Higher labour supply; potential output rise; pressure on wages; higher aggregate demand. | More demand for housing, education, health; possible congestion. | Expand infrastructure; promote skill‑training; encourage private‑sector investment; family‑planning where growth is unsustainable. |
| Population decrease | Reduced labour force; upward wage pressure; lower consumption; higher savings. | Ageing workforce; shrinking market size; possible rural depopulation. | Promote immigration; incentives for higher fertility; support automation; re‑skill older workers. |
| Youth‑heavy age structure | Future labour boost; short‑run lower per‑capita GDP. | High youth dependency; need for schools and entry‑level jobs. | Invest in education & vocational training; create youth employment schemes; child‑health services. |
| Ageing age structure | Higher savings, lower consumption; possible labour shortages. | Increased demand for pensions & elder‑care; higher old‑age dependency. | Pension reform; raise retirement age; improve health‑care efficiency; encourage lifelong learning. |
| Male‑biased sex ratio | Labour surplus in male‑dominated sectors; wage stagnation in those sectors. | Social tension, higher crime risk, reduced marriage rates. | Gender‑sensitive education; promote female employment; campaigns against gender‑based discrimination. |
| Female‑biased sex ratio | Higher female labour‑force participation; possible wage pressure in low‑skill jobs. | Shift in household dynamics; greater empowerment of women. | Childcare subsidies; enforce equal‑pay legislation; protect against exploitation; support women’s entrepreneurship. |
8. Suggested classroom diagrams
- PPF diagram showing a right‑ward shift (growing population) and a left‑ward shift (declining population).
- Two population pyramids: (a) youthful pyramid, (b) ageing pyramid.
- Line graph of dependency ratio over time for a country undergoing demographic transition.
- Bar chart comparing male‑biased, balanced and female‑biased sex ratios and their associated labour‑force participation rates.
9. Revision questions
- Explain how a rapid increase in population can both stimulate and hinder economic development. Include at least three economic indicators in your answer.
- Discuss two policy measures a government could adopt to mitigate the challenges of an ageing population.
- Analyse the likely economic impact of a country where the male‑to‑female ratio is 1.3 : 1. Provide both short‑term and long‑term perspectives.
- Calculate the dependency ratio for a country with the following population data:
- 0‑14 years: 30 million
- 15‑64 years: 50 million
- 65+ years: 10 million
- Define “optimum population”. Why might a country that has exceeded its optimum population experience falling per‑capita income?
- Using the formula for population‑growth rate, calculate the annual growth rate for a country with 2 million births, 1 million deaths, 300 000 net immigrants and a total population of 50 million.
- Explain the concept of population momentum and give an example of how it can affect a country that has already reduced its fertility rate to replacement level.
Answers should reference the concepts above, use appropriate economic terminology and consider both short‑run and long‑run effects.