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Monday, August 13, 2012

Does Declining Fertility Explain Inequality in Developing Countries?

This week's Economist has a "Free Exchange" column (with an expanded online version) in which findings from recent demographic studies are cited showing that income inequality in developing countries is made worse by a decline in fertility. Declining fertility is nearly always associated with a rise in per person income because even if wages don't rise, there are fewer people with whom a worker has to share his or her income.

But not every result of lower fertility is so beneficial and a new study by David Bloom, David Canning, Gunther Fink and Jocelyn Finlay at the Harvard School of Public Health link to come identifies an unexpected effect: in the short term, lower fertility can lead to higher inequality.
It is no surprise that fertility and wealth should be connected. Countries with the highest fertility rates (such as Niger, Mali and Chad, where women can expect to have six or seven children in their lifetimes) are also among the poorest. And, with some significant exceptions (such as China), low-fertility countries tend to be rich. And that pattern is replicated within countries. As a general rule, the poor tend to have larger families.
However, the author goes on to suggest that somehow this drop in fertility "helps to explain the rise in income inequality in developing countries." The problem with this huge conclusion is that the Demographic and Health Surveys, from which the data in the study were drawn, do not capture the range of income in developing countries. It doesn't actually measure income at all--only household assets, and it is unlikely that the very wealthy are included in most of the surveys. So, while the effects noted are almost certainly real, they also almost certainly do not tell us why income inequality exists in developing countries. That explanation is more likely to take us to the question of who controls the resources--typically a relatively small group of people who have most the of the assets, leaving the remainder of the population to exhibit differences amongst themselves demographically, but not to a great enough extent to explain income inequality. 
Needless to say, I hate to dampen a good demographic story, and the author does circle back around to reality with the final comment that "Lower fertility is a boon to poor countries, but it cannot do everything by itself."


  1. Although a probable relationship can be seen among heavy population and economic status, one must consider other variables and factors that would lead to a solid conclusion. It would be interesting to see and pinpoint what factors would be taken into consideration to draw a conclusion for a valid study. It would most likely be an extremely tedious task nonetheless! One of the reasons I'm holding off on having kids is due to the economy and other factors such as global change. It would be hard to narrow it down to just income or assets.

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