FPESA Research Paper Assessment: Fertility Decline Spurs Per Capita Consumption Increase

FPESA Research Paper Assessment: Fertility Decline Spurs Per Capita Consumption Increase

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Ronald Lee and Andrew Mason, “Fertility, Human Capital, and Economic Growth over the Demographic Transition,” European Journal of Population, vol. 26, no. 2 (19 June 2010), pp. 159–82, https://doi.org/10.1007/s10680-009-9186-x.

Fertility decline and accompanying population aging are unlikely to lead to economic decline, this paper finds—and for a reason that may be relevant to the environment. Low fertility is associated with increased per capita consumption, as parents and societies invest in the human capital—chiefly education and health—of each child in smaller generations.

Applying a demographic-economic model that integrates data from the experience of 19 rich and poor economies between 1994 and 2004, the authors conclude that rising investment in human capital as fertility declines diverts money from current consumption. Yet any reduction in economic growth is overcompensated by the higher per capita consumption that this investment in children eventually yields. The authors stress that they are not declaring that lower fertility directly causes increased per capita consumption, only that it is strongly associated with it in their model.

Although the paper addresses economic rather than environmental aspects of this higher consumption, the finding is relevant to ongoing debates about the impacts of changes in both population and consumption on environmental sustainability.

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“The availability of contraceptives can also be interpreted as influencing the price of numbers of children.”

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Key quotes: “[A] number of . . . factors . . . may influence the choice of fertility . . . . These include cultural differences in valuation of numbers versus quality; differences in the relative price of parental consumption, and human capital; the changing availability of new parental consumption goods; differences in child survival; differences in the rate of return to education or in older age survival probabilities . . . . The availability of contraceptives can also be interpreted as influencing the price of numbers of children.”

Assessment: At the center of the FPESA conceptual framework is a dotted box representing the possibility that, by reducing fertility, the use of family planning might actually encourage higher per capita consumption of natural resources. Although this paper makes no mention of either family planning or the environment, it does address this important possibility—and finds it to be more likely than not.

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When fertility falls, per capita consumption increases, but the consumption of the total population does not rise proportionally.

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Because the authors’ interest is in assessing how lower fertility might affect economic growth, they treat consumption in purely economic terms, rather than as the energy or materials consumption that would interest environmental researchers. Nonetheless, they make an additional finding that is environmentally relevant: when fertility falls, according to their model, per capita consumption increases, but the consumption of the total population does not rise proportionally. Parents and societies continue to divert money toward human capital investment that might otherwise have been spent in current consumption of goods (e.g., housing, clothing, entertainment, etc.). The model leaves unanswered whether fertility decline tends to shrink or boost a population’s net consumption over time, compared to what these would have been without fertility decline.

It is also unclear how closely the paper’s model resembles real-world demographic-economic interactions. Although the authors repeatedly call it a “simple model,” most lay readers would not find it so. The authors also call the model “very stylized,” and concede that it is “a very unrealistic characterization of population and the economy” because it uses only three age groups. The model describes hypothetical demographic transitions over a period of two centuries. Nonetheless, the parameters and data used are based on actual demographic and economic experience in such countries as the United States, Japan, India, Mexico, Thailand, and the Philippines.

The paper and the model it describes contribute evidence, at least, that the use of family planning may contribute indirectly to higher per capita consumption. As with the paper by Kyle W. Knight and Eugene A. Rosa, 2011 (an annotation of which will be included in the upcoming FPESA report), however, the Lee and Mason paper does not undermine the demographic pathway from family planning to environmental sustainability in the FPESA conceptual framework. Neither these papers, nor any others we have assessed, offer evidence that fertility decline raises net consumption levels economically or environmentally.

The Lee and Mason paper also illustrates a dilemma that we face in the search for evidence that family planning contributes to environmental sustainability. A fair amount of demographic literature explores the impact of family planning and fertility decline on economic growth, as this paper does. When researchers interested in the impact of family planning on the environment encounter this economic literature, an obvious and increasingly relevant question is what impact economic growth tends to have on environmental sustainability. Perhaps due to the search terms we employed, our literature search did not yield any papers treating this question, and we have been unable to address it in our work.

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The following annotation and assessment is excerpted from the forthcoming report of the Family Planning and Environmental Sustainability Assessment (FPESA) project. The report will contain selected annotations from more than 930 peer-reviewed articles reviewed for potential relevance to the hypothesis that family planning supports environmental sustainability. The annotations are written by project director Robert Engelman with input from members of the project team and, where indicated, members of the project’s international network of research assessors.

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