Human Capital, Population Growth and Economic Development: beyond Correlations

Empirical evidence on three assertions commonly-made by population policy advocates about the relationships among population growth, human capital formation and economic development is discussed and evaluated in the light of economic-biological models of household behavior and of its relevance to population policy. The three assertions are that (a) population growth and human capital investments jointly reflect and respond to changes in the economic environment, (b) larger families directly impede human capital formation, and (c) the inability of couples to control fertility is an important determinant of investment in human capital. The evidence suggests that widely-observed correlations among population growth, human capital and economic variables, which admit to alternative interpretations, are far stronger than are the estimates from studies whose objective is to quantify the causal mechanisms underlying the three assertions; however, there is empirical support for each. The role of population growth in economic development has become a controversial issue in recent years. One of the principal relationships singled out by participants in debates about the consequences of population change is that between population growth and human capital formation. Indeed, one characteristic which distinguishes markedly lowfrom highincome countries is the extent to which families choose to allocate resources to increasing the number of children they have relative to increasing investments in the human capital of each of their children. Table 1 presents correlations among per-capita GNP, population growth, and school enrollment rates for 94 countries circa 1970-80. The broad picture they display is clear--high-income societies have low rates of population growth and high rates of schooling and literacy; countries with high rates of population growth are also characterized by low school enrollment and literacy rates. Within countries too, large families also tend to be families in which children have lower levels of schooling, health, etc. (National Academy of Sciences, 1971). Debates concerning the appropriate policy mix for promoting economic growth can, I think, be summarized by three assertions about the meaning of the relationships among population growth, human capital and economic development, each of which is consistent with the correlational evidence: Assertion (a): Population growth and human capital investment rates reflect the economic circumstances of a country; the observed mix of large families and low levels of health, nutrition and schooling are symptoms, not causes, of a lack of economic development. Governments and international development agencies should therefore focus on promoting (or removing impediments to) economic development and not on families' decisions about their size.