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POPULATION GROWTH AND THE CONSTRAINTOF NATURAL RESOURCES
Submitted by : Tessy Varkey Tirthankar Sarkar & UjjwalaChaurasia
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METHEDOLOGY
POPULATION GROWTH
ECONOMIC THEORIES
THEORIES OF
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Population Growth in Economic Development
Majo
racceler
ation
Aver
age1%pe
ryea
r
ENDO
GENOUSph
enome
n
Incr
easedEmp
loyme
n
Spee
dofGrow
thof
Aver
age2.5%
pery
e
EXOG
ENOUSphe
nomen
o
Impo
rtationo
fHea
l
Reso
urceExha
ustio
n
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Historical changes in Growth rates in WorldPopulation (1700-2050)
YEAR TOTAL DEVELOPED DEVELOPING
1000-1750 0.13 0.13 0.13
1750-1800 0.44 0.64 0.38
1800-1850 0.50 0.81 0.39
1850-1900 0.64 1.10 0.43
1900-1930 0.76 1.09 0.56
1930-1960 1.34 1.02 1.53
1960-1980 1.93 1.09 2.26
1980-1995 1.64 0.94 1.93
1995-2025 1.16 0.60 1.42
2025-2050 0.63 0.11 0.75
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Current World Population Growth Rate
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Demographic Transition Model
Stage 1 Stage 2 Stage 3 Stage 4
BIRTHSAND
DEATHS
PER10
00PER
YEAR
Birth rate
Death rate
Total population
NATURALINCREASE
The demographic transition (DT) is a model used to represent thetransition from high birth and death rates to low birth and death rates as acountry develops from a pre-industrial to an industrialized economic system.The theory is based on an interpretation ofdemographic history developed in1929 by the American demographer WarrenThompson.
NATURAL RATEOF POPULATIONGROWTH (NR)=
BIRTH RATE(BR) DEATH
RATE (DR)
http://en.wikipedia.org/wiki/Birth_ratehttp://en.wikipedia.org/wiki/Death_ratehttp://en.wikipedia.org/wiki/Economic_systemhttp://en.wikipedia.org/wiki/Demographyhttp://en.wikipedia.org/wiki/Warren_Thompsonhttp://en.wikipedia.org/wiki/Warren_Thompsonhttp://en.wikipedia.org/wiki/Warren_Thompsonhttp://en.wikipedia.org/wiki/Warren_Thompsonhttp://en.wikipedia.org/wiki/Demographyhttp://en.wikipedia.org/wiki/Economic_systemhttp://en.wikipedia.org/wiki/Death_ratehttp://en.wikipedia.org/wiki/Birth_rate -
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PHASE 1
PHASE 2
PHASE 3 PHASE 4
BIRTH RATE
DEATH RATE
POPULATION
BIR
TH
RA
TE
DE
AT
H
RA
TENATUR
AL
INCRE
ASE
REASONS FOR
CHANGE IN BIRTH
RATE
REASONS FOR
CHANGE IN
DEATH RATE
H
I
G
H
H
I
G
H
STABLE OR
SLOW
INCRE
ASE
DISEASE FAMINE,
POOR MEDICAL
KNOWHOW. MANY
CHILDREN DIE
H
I
G
H
F
A
L
L
S
R
AP
I
D
L
Y
VE
RY
RA
PI
D
IN
CR
EA
SE
REASO
NS FOR
CHAN
GE IN
BIRTH
RATENUTRITION,
MEDICAL CARE,
WATER SUPPLY
AND SANITATION.
FEWER CHILDREN
MANY CHILDREN NEEDED FOR
FARMING. MANY CHILDREN DIE AT
EARLY AGE. RELIGIOUS/SOCIAL
ENCOURAGEMENT. NO FAMILY
PLANNING
F
A
L
L
I
N
G
FAL
LS
MO
RE
SLO
WL
Y
INCR
EAS
E
SLO
WS
DOW
N
REDUCTI
ON IN
AGE OF
MARRIA
GE.WORSENED
HYGIENIC
CONDITIONS- HIGH
DENSITY -URBAN
SLUMS
LO
W
L
O
W
STABL
E ORSLOW
INCRE
ASEFAMILY PLANNING.
GOOD HEALTH.
LATER AGE OF
MARRIAGE
GOOD HEALTH
CARE.
RELIABLEFOOD SUPPLY.
NATURALINCREASE
1750
70 30 70 30 7090 1810
50 90 1910
50
Demographic Transition Model in Britain
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World Age Structure Database
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Demographic Transition Model - India
0
2
4
6
8
10
12
0
2
4
6
8
10
12
PO
PULATIONOF
INDIA
POPULAT
IONGROWTHR
A TE
0
2
4
6
8
10
12
BIRTH AND DEATH RATE IN INDIA
RATE
PER1000POPULA
T ION
PHASE 1- 1920 TO 1960 Precipitous drop in death rate- decrease in death rate bymore than 20 per 1000 within 40 years larger than the
decrease for the entire period (over 150 yrs) of BritishDemographic transitionPhase 2 not observableFairly Representative of Developing Economies (exceptChina)
DEATHRATE
BIRTH RATE
PHASE I PHASE2/3
Rural (29)National(28)Urban (22)
Rural (10)National (9)Urban (7)
The probability of low-income economies to escape from the strong pressure ofexogenously given population growth appears to be relatively slim within the
next couple of decades.
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DEVELOPEDECONOMY
DEVELOPINGECONOMY
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THE MALTHUSIANMODEL
Thomas RobertMalthus(1766-1834) Britishscholar Influential inPolitical Economy andDemography
(N/N)
(W
)
WO
G
G
Populatio
nG
rowth
Rate
Wage Rate
H
N PopulationN Absolute increase inPopulationW Wage Rate
- Subsistence wage rate
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POPULATION GROWTH ANDCARRYING CAPACITY
Popula
tio
nin
billion7
4
2000
2020
2040
2060
2080
1980
StarvationDiseasePollutionResourcedepletion
Carryingcapacity
oversho
ot
crash
5
6
8
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THEORIES OF RESOURCE CONSTRAINT ONECONOMIC GROWTH
Malthus To The Club ofROME
Reappearance of Malthusian concept in Dennis L.Meadows -
--TheLimits to growth,
Concerning Population-Food crisis. Crisis of Natural resources. Environmental degradation due to overexploitation & waste of resources.
# World population curtailed due to increase indeath rate due to food shortage and
environmental pollution
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THEORIES OF RESOURCE CONSTRAINT ONECONOMIC GROWTH
Malthusian Crisisproved
1973 World Food Crisis. (Due to world scalecrop failure)1974 Oil Crisis by OPEC Embargo
Result > High increase in food and energy price.
Public Awareness to the need and conservation ofthe environment and its natural resources.
It is evident that simple extrapolation from pasttrends will produce future prediction, but the willdeviate widely from actual outcome.
Extract
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DAVID RICARDO (1772 1823)
He Clarified The Mechanism On How TheEconomic Growth Is Constrained By NaturalResources ,By Building The Genuine Theory OfEconomic Development.
His Main Economic Ideas Are Contained In
Principles Of Political Economy And Taxation(1817). This Set Out A Series Of TheoriesWhich Would Later Become TheoreticalUnderpinnings Of Both Marx's DasKapital AndMarshallian Economics.
His theory came into picture , towards thecomplication of industrial revolution inEngland, this was the time when thepopulation was highest.
http://en.wikipedia.org/wiki/Principles_of_Political_Economy_and_Taxationhttp://en.wikipedia.org/wiki/Das_Kapitalhttp://en.wikipedia.org/wiki/Das_Kapitalhttp://en.wikipedia.org/wiki/Das_Kapitalhttp://en.wikipedia.org/wiki/Das_Kapitalhttp://en.wikipedia.org/wiki/Principles_of_Political_Economy_and_Taxation -
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RICARDO MODEL Identified The Capital Accumulation In ModernIndustries, Emerged From Industrial RevolutionWhere Economic Growth Was Main Factor.
CAPITAL
Concept
WAGEFUND
(sum of payments to
labour in advance ofcommodities+
payments for the tools)
Demand of labour = wage rate
supply of labour = population
he termed this phenonemon as shortrun it is the period where populationis constant.
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CONCEPT
C1C2
PRODUCT
PROFIT
C1
C2
PRODUCT
PROFIT
WAGERATE
C1 = LABOUR CAPITAL sumof payments to labour inadvance of sale of commodities
produced by the labour applied.
C2 = payments for thepurchase of tools andstructures complimentary tothe use of labour.
Assuming in the short runsupply of labour remainsconstant. As a result of increased
capital, labour demandincreases and wage rateincreases.This result in in-migration andthe supply of labour increases.
The increase in populationresults in the adjustment of thewage rate to the previouslevel.
PRODUCT MARKET FOR INDUSTRY
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CONCEPTA1 - most fertile land
A2 - 2nd grade land.
A3 - 3rd grade land.
A4 - 4th grade land.
At first the food requirement ofthe settlement is fully servedby A1. As the population increases
corresponding to the increasein the industrial labour force ,the less fertile land i.e.A2,A3,A4 have to be graduallyput to use. This increases the cost ofcultivation and increases thefood price.
A1
A4 A3
Thus the subsistence wagerate increases .
A3 A4
A2A2
PRODUCT MARKET FOR
AGRICULTURE
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THE RICARDO MODEL OF ECONOMIC DEVELOPME
PRODUCT MARKET FOR INDUSTRY
SS
AW
D
B C
D0
D1 D2
(K0)
(K1) (K2)
LS
(L0)
G
WS E
W
(L1) (L2)
EMPLOYMENT
WAGE
RATE
(L)
(W)
0
LS subsistence wage
SS Short run labour supply
DD labour demand curveW present wage rate
Totalwagesgiven
profit
WS modified wage rate
As the labour demandincreases with theaccumulation of capital,wage rate tends to reach ahigher level. This results in inmigration
and labour supply increasesto L1 & L2 .
As a result wage rate adjustsitself and reaches thesubsistence level.
If the subsistence wage rateincreases as a result of limitenatural resources to W then
the profit starts decreasing.
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THE RICARDO MODEL OF ECONOMIC DEVELOPME
PRODUCT MARKET FORAGRICULTURE
CORN OUTPUT/CONSUMPTION
CORNPRICE
HS
WS
P2
P0
0 Q1 Q2
D0D1 D2(N0
)(N1)
(N2)
D0
D1D2
C
(Q)
(P)
D0D0represents the corndemand curvecorresponding to thelabour force L0(in theprevious graph), D1D1 to
that of L1 and so on.
HS is the supplyschedule of corndetermined by its
marginal cost.
As the populationincreases to L2 anddemand for cornincreases to D2D2, thesecond grade of land
needs to be utilised. Itincreases the marginalcost of production and inturn increases the cornprice.This effects in theincrease of subistence
wage rate in theindustrial sector.
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This mechanism of fixed land resourceendowments that constrain economic growth inearly stage of industrialization is called asRicardian trap
SUMMARY
Landlords alone receive enlarged rentrevenue..
The theory predicts that , under given
natural resources endowments in terms offixed land areas by grade, food pricesincreases resulting from population growth.
This will drive the economy into stationarystate where the rate of profit is so low that it
provides no incentive for additionalinvestment and labourers real wage rates donot diverge from a subsistence minimum.
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For rescuing the British economy from the
Ricardian trap , Ricardo proposedliberalization of grain imports.
repeal of corn laws . removes tariff barriers. cheap import of food grains. food prices become low.
CONSEQUENCES
Ricardo model sets out clearly the problem ofnatural resources constraints that low incomeeconomies will have to face when they undergoindustrial development when agriculture isstagnant.
In modern context ,for low income economies: Not possible to solve this problem by
liberalization of food imports alone. The option is to advance agricultural
technology concurrently withindustrialization..
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THE DUAL ECONOMYMODEL
The Dual Sector model, or the Lewis model,is a model in Development economics thatexplains the growth of a developing economyin terms of a labour transition between two
sectors, a traditional agricultural sector and amodern industrial sector.
W. Arthur Lewis (1954) built upon the thrust
of the Ricardo model, a new 2-sector model .
It is a theory of development in whichsurplus labor from traditional
agricultural sectoris transferred to themodern industrial sectorwhosegrowth over time absorbs the surpluslabor, promotes industrialization.
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CONCEPTThe traditional agricultural sector -- characterized by lowwages, an abundance of labour, and low productivity
through a labour intensive production process. In contrast, the modern manufacturing sector is defined byhigher wage rates than the agricultural sector, highermarginalproductivity, and a demandfor more workers initially.
The agricultural sector has a quantity of farm workers that are
not contributing to agricultural output . This group of farmers istermed surplus labour since they could be moved to anothersector with no effect on agricultural output.
Due to the wage differential between the 2 sectors, workers willtend to transition from the agricultural to the manufacturing
sector over time to reap the reward of higher wages. The end result of this transition process is that the agriculturalwage equals the manufacturing wage, the agriculturalmarginal product of labour equals the manufacturingmarginal product of labour, and no further manufacturingsector enlargement takes place as workers no longer have a
monetary incentive to transition..
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O1
INDUST
RIALW
AGE
RATE
AGRICU
LTURAL
OUTPU
T
S T
D1
D0 G
H
SL
SL
O2
R
W
W
O1-O2 -- Industrial labourO2-O1 -- Agricultural labou
S -- Shortage pointAt S, the whole surpluslabour from agriculturehas been migrated toindustry.The agriculturaloutput decreases and
the subsistence wagelevel of industrial labourstarts increasing.
T Turning pointFrom T, the agriculturalwage rate starts
increasing from W.Before reaching point Tthe industrial profitbecomes so low that thecapital accumulationstops.
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Contribution of agriculture has significant role in
developing industrialization.
CONCLUSION
The successful industrialization cannot be expectedwithout the efforts of increasing food production to avoidthe danger of being caught in the Ricardian trap..
Contribution of agriculture to industrialization is not onlysupply of labour or food product but also providingplatform for industrial commodities, earning of foreignexchange through export of agriculture product .
Industrialization & modern economic growth can hardlybe successful without healthy development in agriculturesector.
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