The causes and consequences

of demographic transition
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 PROGRAM ON THE GLOBAL
DEMOGRAPHY OF AGING

Working Paper Series

The Causes and Consequences of the

David Canning

July 2011

PGDA Working Paper No. 79

The views expressed in this paper are those of the author(s) and not necessarily those of the
Harvard Initiative for Global Health. The Program on the Global Demography of Aging receives
funding from the National Institute on Aging, Grant No. 1 P30 AG024409-06.
 The Causes and Consequences of the
Demographic Transition

David Canning

Harvard School of Public Health

July 2011

Abstract:

The causes and consequences of the demographic transition are considered in light of the recent
book by Dyson (2010) on demography and development. In the last 50 years the world has seen
an exogenous decline in mortality that generated a decline in fertility and an increase in
urbanization that has had profound economic, social and political consequences. However,
historically, declines in mortality and fertility, and escape from the Malthusian trap, have
required countries to have already undergone considerable economic and political development.
We therefore argue for two way causality between the demographic transition and economic and
political outcomes.

JEL Numbers: J11, I15, O10.

Tim Dyson (Dyson (2010)) has given us a short book on a big subject. The last 300 years have

seen three remarkable changes in human society. One is the demographic transition, substantial

reductions in mortality rates set off a population explosion, followed by reductions in fertility

that are leading to stable, and in some cases declining, population numbers. A second is

economic growth, the emergence for the first time in history of sustained increases in income per

capita. The third is an increase in social and political equality, particularly between men and

women, with the adoption of democracy and universal adult franchise. This book asks what

causes the demographic transition and what have been its consequences for social, political, and

economic development which is essentially the question of how we explain these three

fundamental changes and the links between them.

Most academic work, both by individuals and within disciplines, is narrow, focusing on

particular mechanisms and there is a tendency to shy away from statements about the big

questions. To its credit, the book does not do this but rather addresses these questions directly by

integrating insights from different disciplines to produce a coherent view of population and

development.

It is easy to critique the book in terms of the individual mechanisms that lie behind the

theory. Each of these has its own literature, with established and dissenting views, and in every

case more could be said than in this short book. I do talk about a few of these mechanisms,

where I feel there is evidence for larger effects than are reflected in the book. However, the key

issue is whether the “big picture” of the demographic transition and its relationship to

development put forward by the book is correct. This means tackling the central thesis of the

book which is that the demographic transition is a largely self-contained process that proceeds

2
independently of social and economic development. The argument is that the mortality transition

occurs exogenously and is the cause of a subsequent decline in fertility and rise in urbanization.

This exogenous demographic process plays out over time, and has effects on economic, social,

and political development.

The case for the complete independence of demographic processes is absurd. There are

clear examples of cases, such as civil wars, when economic, social, or political circumstances

have affected population numbers. While acknowledging this, and discussing the complex

mechanisms that affect demographic processes, the thesis of the book is that by and large

demographic processes are relatively independent and that as a first approximation they are

exogenous and lead to changes in development. One key issue is, therefore, whether there are

important mechanisms that flow the other way, from development to demography that might

have substantial effects and would undermine this view.

A second question is how important the demographic transition has been for the

economic and political changes we have seen. The book makes the case that the demographic

transition made a substantial contribution to these processes but does not address the question of

whether the transition was necessary – could the economic and political changes have taken

place without the transition? I deal with these two central questions in detail below.

The book takes population as defined by fertility, mortality, sex, age structure, and

urbanization. This focus on the number of people, and where they live, is the standard approach

in demography but it misses a key element in terms of the quality of people. There is discussion

in the book that reductions in mortality are probably accompanied by improvements in

population health leading to social and economic benefits but this quality mechanism is not

investigated in the same way as the quantity mechanisms.

3
 Dyson’s view of population and development can be contrasted with the alternative

"unified growth theory" as expounded by Galor (2011). The major theme of that theory is that

there are two epochs in development, the first characterized by a Malthusian trap where any

improvement in living standards inevitably leads to pressure on agriculture and starvation,

followed by an epoch of sustained economic growth following escape from the trap. Dyson

essentially focuses on the modern epoch after we have escaped the trap, but the issue of how we

did this is a fundamental question in development.

Causes of the Transition

Mortality

The book documents the large decreases in mortality over the last 300 years and argues that they

have mainly been due to advances in health knowledge that lead to the prevention and treatment

of infectious diseases. The key argument here is the Preston Curve (Preston (1975)) which shows

that while life expectancy is higher in high income countries, most health gains come from the

curve moving up over time with gains in life expectancy at all income levels. The contribution of

rising incomes to improved health, while real (Pritchett and Summers (1996)), is modest in

comparison. This picture is true both across countries and within developed countries (Canning

and Bowser (2010)) though in developed countries there is likely to be a contribution from the

treatment of non-infectious disease (Cutler, Deaton, and Lleras-Muney (2006)).

Even the poorest developing countries today have seen rapid improvements in health over

the last 50 years. The caveat to this, of course, is the HIV/AIDS epidemic which has led to sharp

reductions in life expectancy in many countries in Sub-Saharan Africa. While this picture of

health improvements being largely exogenous seems true today, this may not have been the case

4
for health improvements in the 18th and 19th centuries. This is linked to the debate about the

relative importance of nutrition, which is endogenous and income dependent, and public health

measures due to exogenous advances in health knowledge in historical mortality improvements.

It is clear that the mortality transition first started in richer countries and spread to poorer

countries over time. It is also the case that the implementation of basic public health measures

requires public health to be a policy goal and the existence of at least rudimentary infrastructure

for the delivery of public health services. Sen (1991) has argued that democracy plays an

important role in ensuring the provision of basic nutrition and public health services.

This suggests that historically the timing of the start of the mortality transition in each

country was dependent on its level of political development. However, while this may have been

true before 1950, since then all countries have started the mortality transition. To some extent

this is simply a process of technological diffusion but it has been aided by the fact that expertise

and funding is available from international organizations to support these measures. This

supports Dyson’s argument, that at least in the modern era, the mortality transition is largely

exogenous.

While the mortality transition has had important consequences for economic and social

development it is important to realize that longer healthy life spans are themselves a gain in

human welfare. If we measure the value of these health gains relative to gains in income we find

that the two have been roughly equal as sources of welfare gains over the last century (Becker,

Philipson, and Soares (2005)).

5
Fertility

A key idea in the book is that while fertility is influenced by government policy, contraceptive

availability, education, ideation, and culture, the central underlying cause of the fertility

transition is the prior mortality transition. The strongest evidence for this is the fact that the

fertility decline always follows the decline in mortality. Against this, the initial response to the

start of the mortality decline is a rise in fertility and the very rapid fertility transition in some

countries in recent years relative to historical episodes means the relationship may not be

automatic. There is undoubtedly an effect of lower child mortality on desired fertility. The

increase in child survival rates reduces fertility required to achieve a desired number of surviving

children. An alternative explanation is the economic model which emphasizes fertility decisions

as being the result of a quantity quality tradeoff. A key is the returns to education and human

capital. If technological progress raises the returns to schooling, families may decide to have

fewer children but invest more in each child. A third idea is that advances in contraceptive

technologies have played a key role in allowing the reduction in fertility.

It is difficult to decide between these theories using household level data. Replacement

fertility, in direct response to a child death is fairly low, but the real issue is how important future

child mortality risk is in fertility. Similarly with education, the issue on returns is about

expectation of earnings over the child’s future life time. Neither the mortality risks, nor earning

expectations, are usually measured directly in household surveys. However there is clear

evidence that while household level characteristics do affect fertility, most of the fertility change

we see during the fertility transition is not due to changes in these characteristics. Rather all

women move towards lower fertility without large changes in household level socio-economic

variables. Changes in fertility behavior is more like a change in a social norm than changing

6
independent individual decisions characteristics, and is likely because of common, community-

wide factors, such as mortality expectations or earnings expectations. The book also makes the

case that while the mortality transition may be the underlying cause of the fertility transition it

may work through intermediate factors, making causality even more difficult to determine. For

example, reductions in infant mortality may lead to large family sizes, with negative

consequences, and it is the observation of these large families in their communities that may lead

to women deciding to have fewer children without explicitly considering mortality rates.

The availability of contraception and abortion clearly affect fertility rates, but may not be

decisive in allowing fertility to decline. In Ireland despite contraception and abortion being

illegal the total fertility rate had declined to four by 1979 which was very high by European

standards of the time. After 1979 and the legalization of abortion, fertility fell quite quickly to

replacement levels with consequent effects on female labor supply, age structure, and economic

growth. My view is that it is very difficult to see how a country could achieve replacement

fertility without access to contraceptives or abortion. However since all countries now seem to

allow access to some form of contraception1 in practice this is no longer a key issue.

In many countries the fertility transition has occurred after mortality decline but before

substantial gains in income per capita, for example, both India and China saw large fertility

declines before each of their growth surges. However, the continuing decline in fertility to

replacement and below usually occurs in conjunction with rapid growth making it difficult to

establish causality. While the aggregate level data is consistent with the idea that the mortality

transition drives the fertility transition, my own view is that the question is still open on the

importance of the returns to human capital and the quality quantity tradeoff. Today this is a

1
The mix of different contraceptive methods, sterilization, and abortion used to control fertility varies enormously
across countries suggesting that access to at least one method has a large effect while the availability of some
methods and not others may have a smaller impact.

7
central question in Sub-Saharan Africa, will the substantial declines in child mortality we have

seen be sufficient to induce large declines in fertility without economic growth or will fertility

decline stall?

Urbanization

Prior to the demographic transition high mortality in cities tended to give them an excess of

deaths over births and they were sustained only by rural to urban migration. As mortality

declined the death rates in cities fell below the death rate in rural areas. The urban population

became self sustaining though urbanization, meaning the increasing proportion of people in

urban areas, requires continuing rural to urban migration.

The economic theory of urbanization is that migration equalizes net advantages of living

in different settings; these net advantages take into account all factors such as earnings, living

space, health, and social contact (Glaeser (2011)). Cities tend to have higher wages on average

than rural areas but housing prices are higher and crowding may make cities more or less

attractive than the countryside. The rise in rural population that follows mortality decline means

more workers per acre of land and lower agricultural wages due to diminishing returns, the

classical Malthusian argument. Production in the manufacturing and service sector in cities do

not have a fixed factor and do not suffer from decreasing returns, in fact we see higher

productivity in larger and denser cities.

From the point of view of a single country with international trade, population pressure

will therefore tend to produce urbanization. However on a worldwide basis, the larger population

still needs to be fed. In a Malthusian setting this requires an ever increasing labor inputs in

farming with diminishing gains in output. In fact, in the modern era we see increased

8
productivity in agriculture attributable to both technology and increased capital intensity.

Technological progress and increased capital tends to reduce the demand for labor in agriculture

and increase the demand for labor in industry. A striking feature of the modern era has been the

reduction of the absolute numbers of workers in agriculture and the reduction in land area

devoted to agricultural production – technological progress and the mechanization of farming

have essentially removed the Malthusian check. A similar process is now happening in the

second transition where technological advances and increasing capital intensity are reducing the

demand for labor in industry and are being accompanied by a shift of labor into services.

My view until quite recently was that urbanization was a combination of push factors

from the countryside and pull factors from the city, with excess labor in the rural area producing

a push and industrialization and high wages in the cities providing a strong pull. The problem

with this view is that, as pointed out by Dyson, urbanization in Africa over the last 50 years has

proceeded apace with that of Asia (Bloom, Canning, and Fink (2008)). Given the more rapid

productivity gains in agriculture and industry in Asia, this is difficult to explain. Dyson’s

conclusion is that urbanization is the inevitable result of the demographic transition. The excess

population in the rural areas tends to move to the cities largely independently of economic

considerations, partly because cities are more attractive places to live for non economic reasons.

For example mortality rates are now often lower in urban than in rural areas, even among people

of low socioeconomic status, and cities may have cultural and social advantages not found in

rural settings

My view is that large scale urbanization requires technological progress and increased

capital intensity in agriculture to allow sufficient food production for the growing population

with a declining agricultural workforce. However, the similarity of the urbanization rates in Asia

9
and Africa means that the pull factors of industrialization and high urban wages may not be of

central importance.

The Quality of People

A remarkable feature of the modern era is the increase in the “quality” as well as quantity of

people. In economics, quality or human capital has been taken to be synonymous with education

but we should think of the quality of people in a broader sense. Over the last 100 years we have

seen substantial increases in the physical and cognitive development of children, as evidence by

gains in adult heights (Fogel and Costa (1997)) and IQ scores (Neisser (1998)), even in the

component not associated with education. These gains have been due to improvements in

nutrition and health in the first few years of life (Akachi and Canning (2007)), the mortality

transition that sets off the demographic transition is also usually a health transition that is

associated with better nutrition and a lower burden of disease. In addition, the onset of disability

and physical and cognitive decline in old age is occurring later in life – the compression of

morbidity (Mor (2005)). These improvements in physical and cognitive ability, in the quality of

people, have played a large role in economic and social development. I would argue that

including measures of these improvements in population quality, in addition to population

quantity, in demography provides a richer basis for thinking about the link between population

and development. My view is that the economic and social effect of these quality changes has

been fundamental in promoting economic growth. One reason for a higher return to education is

the increased healthy life span people now expect, which increases the time horizon for the

returns to education.

10
Consequences of the Transition

Economic Consequences

Surprisingly, the original Malthusian argument that larger populations are associated with lower

incomes, because of population pressure on agriculture and food leading to impoverishment, is

not discussed in the book, perhaps because it has already been discussed in Dyson (1996). I

agree with the argument there that productivity gains and mechanization have meant that food

production has not proved fundamental barrier to economic growth though the case for the

Malthusian argument in the African context has been undergoing something of a revival (Young

(2005)). Newer versions of the argument are that large population numbers will lead to

impoverishment in the future because pressure on other scarce resources such as energy, or that it

will contribute to global warming. My view is that these possible negative consequences can be

addressed through incentive mechanisms, such a pricing carbon emissions, and do not

fundamentally require population control, but it would be helpful to have at least some

discussion of these issues.

The fundamental point however is that in practice we have escaped the Malthusian trap.

The demographic transition leads to four to ten fold increase in population numbers since the

mortality decline precedes the fertility decline. In the Malthusian world this would put pressure

on agriculture, leading to starvation, and the death rate would rise to return the population to its

equilibrium size. We have avoided this outcome by massive gains in agricultural productivity.

These agricultural productivity gains are a necessary condition for the demographic transition to

occur- without them any mortality gains would be short term and would be reversed by

starvation. This undermines the argument for the pure exogeneity of the mortality transition - it

requires technological advances in agriculture to be available for the transition to occur,

11
Even when we have escaped the agricultural Malthusian trap, the Solow growth model predicts a

negative association between population growth and economic growth as the growth in the work

force dilutes the capital stock per worker in industry. There is some discussion of this negative

relationship using recent data in the book but my view is that studying this relationship can be

misleading. In practice the economic effects for population growth depend fundamentally on

whether it is due to a high birth rate or a low death rate (Bloom and Freeman (1988), Kelley and

Schmidt (1995)). Adding these two components together, and expecting the same results on

growth independent of the source of the population growth is not feasible. If population growth

has negative consequences for economic growth, we would expect to see a negative association

between the birth rate and economic growth. Figure 1 shows just this expected negative

relationship between the birth rate in 1980 and growth in real GDP per capita (purchasing power

parity adjusted) over the period 1980 to 2000 in 127 countries using data from the World Bank

(2011). On the other hand we expect to see a positive relationship between the death rate and

economic growth as high death rates ease population pressure. However the relationship between

death rates on economic growth shown in Figure 2 for the same sample is negative, indicating

that countries with higher death rates have lower rates of economic growth. The effects of birth

and death rates are not equal and opposite as would be required for population growth to be a

meaningful summary statistic.

The book does discuss some reasons why birth and death rates have effects over and

above their impact on population growth. The first is that they have different effects on age

structure which can give rise to a demographic dividend, a rise in the working age share of the

population, when the baby boom, brought about by falling infant mortality, is followed by a

12
decline in fertility. More importantly the decline in death rates leads to a longer life span which

can increase the incentive to invest in human capital. Declining mortality is usually accompanied

by declining morbidity. There is increasing evidence that improvements in early childhood

health and nutrition lead to improved educational outcomes and labor market productivity.

Fewer children allows greater female labor market participation (Bloom, Canning, Fink,

and Finlay (2009)). In addition, smaller numbers of children can allow a quantity –quality

tradeoff with each child receiving a larger investment in health and education. While the book

makes all these points there is a difficulty in establishing the magnitude of these effects since the

associations seen in the data may not be causal. However there is recent evidence of large causal

effects on education and earnings of eradicating malaria and improving childhood nutrition

(Bleakley (2010), Hoddinott, Maluccio, Behrman, Flores et al. (2008)). There is also emerging

evidence of causal effects of reduction in fertility on investments in children (Schultz (2009)).

While everyone seems to agree on the negative effects of high fertility, there is still a debate

about whether the quality effects of improvements in health outweigh the negative effects of

additional population numbers when mortality declines (Acemoglu and Johnson (2007), Ashraf,

Lester, and Weil (2007), Bloom, Canning, and Sevilla (2004)) .

Social and Political Consequences

The case for the social and political consequences of the demographic transition is perhaps the

most difficult; though there is undoubtedly an influence, its magnitude relative to other forces is

difficult to determine. In the Malthusian world we have high returns to land and excess labor at

subsistence wages, which favors a political system under the control of those who own the land.

The very high death rates, and decline in population, due to the Black Death in 14th century

13
Europe appear to have caused a shortage of labor, leading to a rise in wages and the breakdown

of the feudal labor system (Herlihy (1997)), but this was due to a temporary rise in mortality, not

the declines we see as part of the demographic transition.

The demographic transition and population growth would lead us to expect a world of

labor surplus with high economic rents and politic power for the owners of land and capital.

This has not happened, rather the wages and the political power of workers have risen relative to

other classes. The key force behind the rise in labor productivity and wages was the industrial

revolution and the rise of industry. The new means of production increased the power of

workers, particularly skilled workers. My view is that it is this rising economic power, rather

than the demographic transition that lead to the progressive expansion of the franchise among

men in several countries during the 18th and 19th centuries.

Where the book may be on much stronger ground is in the decline in gender specific roles

in society, the decline in marriage, and the economic and political empowerment of women

being linked to the decline in fertility. Part of this political empowerment has been the extension

of the franchise to women. The emphasis of psycho-social as opposed to purely economic

mechanisms for these changes also seems plausible. As always, however, we have the problem

of reverse causality, that these economic and social changes may determine fertility as well as

being determined by it.

Unified Growth Theory

In unified growth theory we begin in a Malthusian world in which improvements in technology

can raise living standard temporarily, reducing death rates. Population growth then puts pressure

on agriculture which leads to starvation until equilibrium is reestablished at subsistence level of

14
wages but with a larger population. Improvements in health technology and reductions in

mortality similarly raise population numbers and lead to starvation raising the death rate back to

its old level. In such a world economic growth in per capita terms is impossible. However,

technological progress does raise agricultural productivity and allows for a larger population to

be sustained - all technological progress goes into population numbers not income per capita.

As population numbers increase the rate of technological progress increases; a large

population produces more new innovations than a small population. Technological progress

becomes sustained and cumulative; it becomes geometric rather than arithmetic. Improvements

in agricultural techniques and the mechanization of agriculture make the fixed factor, land, less

important and less of a constraint. More importantly this technological progress leads to new

methods of production, and new research methods for producing new technologies, that increase

the returns to education. This leads to a quality quantity trade off where families choose to have

fewer children in order to enable investments in education that will make these children better

off. This reduction in fertility means population growth is limited to a rate that can be covered

by technological advances, and allows sustained economic growth. Economic growth is also

assisted by improvements in health.

In Dyson’s view the central driving force is improvements in mortality that induce lower

fertility. Unified growth theory gives pride of place to technological improvements in

production and increased returns to education that produce the quantity quality tradeoff and

induce fertility decline.

15
Conclusion

Dyson puts forward a coherent theory in which a largely exogenous demographic transition,

fundamentally driven by reductions in death rates due to advances in public health has had major

effects on economic, social, and political development. When I first read this book I was

surprised by the argument for the exogeneity of the demographic transition. My own view is that

the mortality transition is initiated by public health advances, but for it to be sustained we require

productivity gains in agriculture that allow the larger population to be fed and to prevent the

mortality gains from being reversed through starvation. I would also put more emphasis on the

argument that a major underlying cause of fertility decline is technological progress that raises

the return to education and induces a reduction in the number of children and greater investments

in each child’s schooling - the quality quantity tradeoff. I would also emphasize the role of

economic forces in determining urbanization, rather than seeing it as an inevitable consequence

of the demographic transition.

While I disagree with Dyson, he has an arguable case that while these other forces exist,

they have not proven decisive and in practice fertility decline and urbanization have inevitably

followed the mortality transition. His view is essentially demography can be left to

demographers - whereas I think it is a more organic part of the modern development that has

been in part a consequence as well as a cause of the process. It may be that the issues are more

about timing that about eventual outcomes. The process described by Dyson – the demographic

transition and associated economic and political changes – is inevitable but the speed at which

this process occurs may differ greatly depending on feedbacks to mortality and fertility. While

Saharan Africa will likely follow a similar process of development to that already seen in other

16
countries this process may take 50 years, or it may take 200 years; the difference between these

in terms of human welfare is enormous.

While the book makes the case that the demographic transition has contributed to

economic growth and political change, a key question is whether it is necessary and sufficient for

modern development. Unified growth theory places the fundamental source of growth as

technological progress in production with a contribution from improved population health as

mortality declines. However, in the absence of fertility reduction the theory predicts that the

economy is in a Malthusian Trap; technological gains lead to growth in population numbers

rather than income levels. While technological gains are the driving force, in order to turn these

into higher income, and escape the Malthusian Trap, we need reductions in fertility. My view is

that these reductions in fertility have been central in allowing us to escape this trap.

However, technological advances in health, and the improvement in health human

capital, have played a major role in spurring economic growth. I would go further than Dyson in

emphasizing that health improvements that reduced mortality and increased population numbers

also improved population quality in the form of health human capital and these quality gains

have helped fuel economic growth.

The story of the modern world is often told as a story of the industrial revolution driven

by technological advances in manufacturing. To this we should add technological advances in

public health that have allowed enormous gains in life expectancy. The modern world has seen

both an industrial revolution and a health revolution. In addition to both of these we have the

remarkable achievement of having escaped the Malthusian trap of population pressure leading to

food shortages. This, in part, has been driven by technological advances and mechanization in

the agricultural sector, but mainly by a decline in fertility.

17
 Figure 1
Birth Rates and Economic Growth

10

8
GDP per Capita Growth Rate 1980-2000

4
(percent)

-2

-4

-6

-8
0 1 2 3 4 5 6
Crude Birth Rate 1980 (percent)

Based on data for 127 countries from the World Bank's World Development Indicators 2011.
The GDP per capita is measured at purchasing power parity and the growth rate is the annual
average over the period.

18
 Figure 2
Death Rates and Economic Growth

10
GDP per Capita Growth Rate 1980-2000

4
(percent)

-2

-4

-6

-8
0 0.5 1 1.5 2 2.5 3
Crude Death Rate 1980 (percent)

Based on data for 127 countries from the World Bank's World Development Indicators 2011.
The GDP per capita is measured at purchasing power parity and the growth rate is the annual
average over the period.

19
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