Demographic transition and the dividend.

In the course of the demographic

demographic dividend transition, countries experience an increasing
share of the working age population relative to
The rapid population growth in the Philippines the total population and this creates favorable
over the last several decades has hindered the effects on the per capita income. In addition to
country’s economic development. From 2000 the first dividend, there is another positive effect
to 2009, the Philippines had one of the highest on economic growth and is referred to as the
population growth rates in the Southeast Asian second demographic dividend. This dividend
region at 2.04 percent (as of 2007) and the results when individuals accumulate savings in
second largest population of more than 92 their working years to serve as buffer during
million in 2009, next only to Indonesia. It comes their retirement years. While accumulation of
as no surprise that in 2006, 32.9 percent of our capital can be used to deal with the lowering
population, or an equivalent 28 million Filipinos of income in the older ages, this capital also
were living below the poverty line (NSCB, 2006). influences economic growth. As Mason (2007)
points out, it is when society increases its savings
The core idea which links population and rate that more rapid economic growth results—
economic growth is demographic transition, creating the second demographic dividend. Mason
described as "a change from a situation of high estimated that the first and second demographic
fertility and high mortality to one of low fertility dividends account for 37.7 percent of the yearly
and low mortality." A country that enters into average per capita growth rate of Japan from
a demographic transition experiences sizable 1950 to 1980.
changes in the age distribution of the population
and this affects economic growth. The Goldilocks period and high
economic growth
The Philippines failed to achieve a demographic
transition similar to what its Southeast and East As countries move from large families (high
Asian neighbors had in the past three decades. fertility rate) and poverty into small families (low
All of the mortality rates of these countries fertility), high economic growth and ageing, they
(including the Philippines) broadly declined at pass through what is called a Goldilocks period:
similar rates. In the Philippines, however, fertility a generation or two in which fertility rate is
rates dipped slowly; so while population growth neither too high nor too low (The Economist,
rates substantially dropped to below 2 percent October 2009). The fertility rate consistent
a year in other countries (such as Thailand, with stable population is about 2.1 (also known
Indonesia, and Vietnam), the Philippines’ high as the replacement rate of fertility). The fall to
population growth rate of more than 2 percent replacement fertility is a unique and precious
per year barely changed. opportunity for higher economic growth. The
figures in Table 1 show the Total Fertility Rates
Studies show that demographic transition (TFRs) for selected countries in East Asia for
accounts for a significant portion (about one- the period 1960 to 2006. The table shows that
third) of the economic growth experienced by poor and rich countries are racing though
East Asia’s economic “tigers” during the period the demographic transition and achieving the
1965 to 1995 (Bloom and Williamson, 1997). The replacement fertility rate of 2.1: Singapore in
effect of the demographic transition on income the mid-1970s, South Korea in the mid-1980s,
growth is known as the first demographic Thailand in 1990,Vietnam and Myanmar in 2006.

policy brief_may 2010_2.indd 1 5/13/2010 12:40:08 PM

 It is interesting to note that only three (3) countries Speeding up the demographic transition
in the table have TFRs of more than 3.0 in 2006: the
Philippines (3.30), Lao PDR (3.29) and Cambodia (3.27).
The effects of rapid population growth (or high
Moreover, Lao PDR and Cambodia have reduced their
fertility level) on economic growth and poverty have
TFR much faster than the Philippines, having TFRs of
been carefully studied, documented and quantified
about 6 during the 1990s compared to the Philippines’
by researchers and the results point to the same
TFR of 4.31. It would be disheartening to see that years
conclusion: that rapid population growth in poor and
down the road, Lao PDR and Cambodia would be
developing countries hinders economic development,
enjoying the dividend associated with the demographic
which pushes the next generation into the poverty
transition and transform their economies to the level
trap. The Philippines appears to be the only country
that will improve the lives of millions of their citizens,
in all of Asia, and perhaps one of the few in the world,
while the Philippines continues to languish in the high
where the population issue remains controversial to
population growth-high poverty incidence trap.
this day.

The main policy issue that should be addressed

Table 1. Total Fertility Rates (TFRs) for selected East
Asian Countries: 1960-2006 immediately is how to harvest the demographic
dividend quickly. Advocates of speeding the
YEAR demographic transition place emphasis on the need
Country
1960 1970 1980 1990 2000 2006 for public effort to accelerate voluntary reduction in
fertility rates as soon as possible. Sachs (2008) pointed
South Korea 5.67 4.53 2.83 1.59 1.47 1.13
out that “demographic transitions, where they have
ASEAN 5 occurred, have typically been accelerated and even triggered,
Singapore 5.45 3.09 1.74 1.87 1.44 1.26 by proactive government policies.” Thus, there is a need to
Thailand 6.40 5.33 3.21 2.11 1.86 1.85 influence public policies that play an important role in
Indonesia 5.52 5.35 4.36 3.10 2.42 2.23
assisting, particularly the poor households, in achieving
a voluntary reduction in fertility rates. This will relieve
Malaysia 6.81 5.47 4.21 3.68 2.96 2.65
the direct pressures of population growth, particularly
Philippines 6.96 6.20 5.17 4.31 3.62 3.30
unwanted fertility estimated to contribute about 16
Rest of SE Asia percent of the future population growth, through
Vietnam 6.05 5.89 4.97 3.62 1.90 2.08 direct population policies.
Myanmar 6.06 5.98 4.54 3.38 2.41 2.10
Brunei 6.83 5.62 4.04 3.20 2.58 2.34 The current strategy of reducing the total fertility rate
Cambodia 6.29 5.81 5.84 5.73 3.96 3.27
by relying on Natural Family Planning (NFP) methods
clearly will not bring us to the Goldilocks period at
Lao PDR 6.42 6.42 6.41 6.08 4.03 3.29
a faster pace. Even Health Secretary Esperanza Cabral
The TFR is the average number of children a woman would bear realized this when she acknowledged that “even as
during her lifetime given current age-specific fertility rates.
population growth is coming down, it is not coming down
at the rate necessary to improve the socioeconomic status
The results of the study by Mapa and Balisacan (2004), of the country.” (Interview, Philippine Daily Inquirer, 28
using cross-country data from 80 countries over the February 2010)
period 1975 to 2000, showed that the difference in the
population structure of Thailand and the Philippines
accounts for about 0.768 percentage point of forgone
TFR under two scenarios: A simulation
average annual growth (missed first dividend) for the
Philippines from 1975 to 2000. This forgone growth
accumulates to about 22 percent of the average income The slow pace by which the total fertility rate has
per person in the year 2000. It is even more impressive been reduced, (from 6.96 in 1960 to 3.30 in 2006) -
when translated into monetary values. It meant that a measly 1.6 percent per year - can be attributed to
rather than a per capita GDP of US$993 for the year a lack of concrete and proactive government policies
2000, Filipinos would have gotten US$1,210 instead. on population management aimed at accelerating the
Moreover, the number of the poor would have been demographic transition. Given the same set of policies
reduced by about 3.6 million. With that many out of (e.g., gearing towards the use of the natural family
poverty, fewer Filipinos would have been counted planning methods), what will the TFR be in, say, two
among the poor by the year 2000. or three decades from now? Put differently, under the
status quo (business as usual), when do we achieve

POPULATION MANAGEMENT SHOULD BE MAINSTREAMED IN THE PHILIPPINE AGENDA 2

policy brief_may 2010_2.indd 2 5/13/2010 12:40:15 PM

 the Goldilocks period that is conducive to higher Figure 2. TFR under two scenarios
economic growth?

An essential variable that reduces fertility rate is

income. Studies have shown that as the income of the

Total Fertility Rate

household increases, the fertility rate tends to decrease.
Figure 1 shows the relationship between regional per
capita income (in natural logarithm) and the regional
total fertility rates from 1993 to 2006.The TFR regional
data were generated from the National Demographic
and Health Survey (NDHS) while the regional per
capita income came from the Regional Gross Domestic
Product (RGDP) report of the National Statistical Year
Coordination Board (NSCB). The figure shows that as
the incomes of the regions increase, the TFRs decrease.
It should be noted that no region has reached a TFR
of 2.1. Scenario 2 assumes the same average income growth of
Figure 1. Relationship between TFR and per capita 4 percent plus government intervention to relieve the
GDP by Philippine regions (1993-2006) population pressure from unwanted fertility, estimated
to account for 16 percent of the future population
growth. To be more realistic, scenario 2 further
assumes that only 90 percent of the households with
unwanted fertility will be covered by the government
program.
Regional TFR

The current and future TFRs under these two scenarios

are presented in Figure 2. Using the 2008 TFR of 3.3
as base value, in the business as usual scenario 1,
the Goldilocks period will be reached by 2030, or
twenty years from now. In the second scenario where
government intervention targets only households
Regional GDP per capita (in logarithmic scale)
with unwanted fertility, the Goldilocks period will be
achieved 10 years earlier or in about 2020.

Table 2. TFR of the second and bottom quintile under

Using the relationship between per capita income two scenarios
and TFR, Mapa, Lucagbo and Ignacio (2010) built an 2008 2010 2020 2030 2040
econometric model to determine the effect of income
Second quintile
on TFR, controlling for other factors such as education
of the household head and labor force participation of Scenario 1 4.20 4.09 3.55 3.01 2.47
women, among others.The study shows that increasing Scenario 2 4.20 3.16 2.62 2.07 1.53
per capita income by one percent reduces TFR by Bottom quintile
0.025 per year. Using the results of the study, simulation
Scenario 1 5.20 5.10 4.55 4.01 3.47
analysis was made to plot the path of the country’s TFR
under two scenarios. Scenario 2 5.20 3.93 3.39 2.85 2.31

Scenario 1 is the business as usual scenario where TFR The same simulation exercise was made for the
is reduced mainly as a result of increasing income. This poorest 40 percent of the households, where the TFRs
scenario assumes that the country’s GDP is growing are high. In 2008 for example, while the overall TFR
at an average of 4 percent per year (and thus per of the country was 3.30, the TFR of the poorest 20
capita GDP is growing at 2 percent per year, net of the percent (or the bottom quintile) was 5.20 and the
population growth of about 2 percent per year). second quintile, 4.20. The values in Table 2 show that,
under the status quo, the households in the bottom
quintile will not experience the Goldilocks period in
this generation. The TFR of the poorest 20 percent of

POPULATION MANAGEMENT SHOULD BE MAINSTREAMED IN THE PHILIPPINE AGENDA 3

policy brief_may 2010_2.indd 3 5/13/2010 12:40:19 PM

 the households 30 years from now (or in 2040) will be reducing fertility rates in households. At the same
at 3.47. This estimated TFR in 2040 will still be higher time, government must also directly intervene by, for
than the recorded TFR of Thailand in 1980 at 3.21. example, providing contraceptive services to poor
households that cannot afford these contraceptive
Under scenario 2 where government intervenes
services; for without such government support, the
through proactive population management policies, the
fertility rates in these households will remain high
TFR of the poorest 20 percent will be at a manageable
and unmanageable, condemning them to poverty. We
level of 2.31 by the year 2040.
cannot afford to ignore the population issue because
population gravely affects our country’s growth and
For households in the second quintile, the TFR will still development. We are paying a high price for our rapid
be at 2.47 in year 2040 under the status quo, while the population growth.
Goldilocks period will be achieved earlier in year 2030
when the TFR for this group is projected to be at 2.07.
References

Mainstreaming population management Bloom, D.E. and Williamson, J.G. (1997). “Demographic
in the development agenda Transitions and Economic Miracles in Emerging Asia.”
Working Paper 6268, National Bureau of Economic
Research, November 1997.
Addressing the poverty problem is the single most
important policy challenge facing the country today Mapa, D.S., Lucagbo, M.D.C. and Ignacio, C.S. (2010). Is Income
and one cannot ignore the growing empirical evidence Growth Enough to Reduce Fertility Rate in the Philippines?
linking population growth on the one hand, and poverty Empirical Evidence from Regional Panel Data. . A paper
on the other. Development policies aimed at addressing presented at the Philippine Population Association (PPA)
the alarming poverty incidence in the country must Annual Scientific Conference on February 4 to 5, 2010 at
include measures that will manage the country’s the Heritage Hotel, Pasay City.
bourgeoning population and bring down the fertility Mapa, D. S. and A. Balisacan (2004). “Quantifying the Impact
rate to a level that is conducive to higher economic of Population on Economic Growth and Poverty: The
growth. Policy makers must address the country’s Philippines in an East Asian Context.” In: Population and
rapid population growth head-on through proactive Development in the Philippines: The Ties That Bind (Ed
government policies, such as the Reproductive Health Sevilla, L.A.). AIM Policy Center, Makati City.
(RH) bill. The failure to pass the RH bill in the 14th
Congress is very unfortunate for the damage that a Mason, Andrew (2007). “Demographic Dividends: The Past,
rapid population growth will bring to this generation the Present and the Future.” In Mason, A. and Yamaguchi,
and the next are irreversible. We simply cannot afford Mitoshi (eds.). Population Change, Labor Markets and
Sustainable Growth: Towards a New Economic Paradigm.
to have millions of Filipinos go through the vicious
ELSEVIER.
cycle of high fertility and poverty: a high fertility rate
prolongs poverty in households and poor households Philippine Daily Inquirer (2010). Interview with Health
contribute to high fertility rates. Secretary Esperanza Cabral by Jerry E. Esplanada,
February 28, 2010 issue.
Government must intervene to break this cycle by Sachs, J. D. (2008). Common Wealth: Economics for a Crowded
formulating policies that will increase the capacity of Planet. Penguin Books.
women to participate in the labor market, invest in
health to decrease child and maternal mortality and The Economist (2009). “Falling fertility: How the population
enhance education, particularly of women. These problem is solving itself.” October 31 to November 06,
are the policies that have been found successful in 2009 issue.

This policy brief is a product of the study Can Population Management be Mainstreamed in the Philippine Development
Agenda? by the Asia Pacific Policy Center in collaboration with the Philippine Center for Population and Development.
Dennis S. Mapa is an Associate Professor and Director for Research at the School of Statistics and Affiliate Associate
Professor at the School of Economics, University of the Philippines, Diliman, Quezon City and Research Fellow, Asia-
Pacific Policy Center. Email address: [email protected].
Arsenio M. Balisacan is a Professor of Economics at the School University of the Philippines, Diliman, Quezon City and
President of the Asia-Pacific Policy Center. Email address: [email protected].
Jose Rowell T. Corpuz is a Research Associate at the Asia-Pacific Policy Center and a Ph.D. Candidate at the School
of Economics, University of the Philippines, Diliman, Quezon City.

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