Post-2015 Consensus: Population and Demography Perspective, Canning
The challenge paper covers a wide range of issues and there is a lack of detail in some of the arguments. We have to think of priorities across as well as within issues, and this paper puts forward five thematic priorities.
There is a fundamental issue of applying benefit-cost analysis to reducing fertility, since this takes no account of the well-being of those potentially born. This is probably an insoluble philosophical problem, but we also have the more mundane issue that people like to have children, and this benefit is not included in the analysis. People value children, and the proper place for decision making should be at the household level. I would prefer to see targets based on access to family planning rather than contraceptive use. On the benefit of maternal and child health, much of the benefit of family planning comes from better birth spacing and timing, rather than number of births. Births before the mother is 18 or less than 36 months after the previous birth are very high risk to mother and child.
The largest impact of family planning appears to be through rising per capita income, which I do not see as a measure of welfare. National income accounting does not, for example, include leisure time. Similarly, the value to parent of having children does not appear in the national income accounts.
When families make decisions, there is a strong case for giving more power to women, particularly in male-dominated societies, as husbands almost always want more children than their wives, but it is the wives who bear the costs of higher fertility.
Improvement in healthy lifespan has contributed as much as economic growth to improvements in human welfare since 1960. The problem of an aging population is that it can lead to a rise in the old age dependency ratio. But this does not have to be so. If the old save for their retirement needs, including healthcare, they are not dependent. A simple way to achieve this is to force savings out of earnings into private accounts to meet retirement needs, supplemented by a basic pension to avoid poverty. In this way, there are only minimal transfers between generations, which means the age dependency issue is not really a problem. Population aging is incompatible with the current institutions and work and pension arrangements in many countries. We have to change the institutions and pension systems.
I agree with the paper’s emphasis on migration as a potential source of large welfare gains. The most difficult challenge to migration is the fear of changes in the receiving country’s political economy due to migration. A simple way of allowing migration would be for countries to merge and remove national borders, which is essentially the approach of the European Union. However, large countries have more heterogeneous populations and it is more difficult to provide public goods to heterogeneous populations. Nevertheless, to realize the overall benefits, workers who compete with migrants need to be compensated. On the issue of family connections, I disagree with the authors; there are enormous welfare gains from allowing migration due to family connections.
My view on urbanization is that at the individual level welfare seems to be higher in cities than in rural areas. This is true not only in terms of income but also health. However, there seems to be little or no effect on economic growth and we should therefore be agnostic on the issue of encouraging or discouraging urbanization.
On the issue of population quality, I agree with the view that subsidies should be targeted at early education in kindergarten and primary school, rather than tertiary education, on the grounds that returns at the earlier levels may be higher and focusing on these levels will tend to help poorer families and encourage equality. I also agree with the emphasis on health as a factor that has a high benefit-cost ratio both in itself and in terms of its effects on physical and cognitive ability and worker productivity.
In terms of overall priorities, migration and pension reform have very little direct resource cost and make efficiency gains by changing institutions or rules. The problem is that there are winners as well as losers, so mechanisms are needed to achieve the gains in ways which are politically acceptable. Family planning has very high benefit-cost ratios and would benefit the poor. I would prioritize this over amelioration of urbanization because it is difficult to think that the various location specific interventions needed would exceed these values.