Demographic, Social, and Economic Drivers

Eric Kemp-Benedict

Global Drivers Topic Working Group

Chiang Mai, 12 Sept 2011

DEMOGRAPHICS

Demographic Drivers

• Natural growth– The demographic transition

• Migration– Who? Why?– Out-migration, in-migration, rural-urban

• Population structure– AIDS

• Density– Pressure on land and water resources– Inheritance and division of land

http://www.nssgeography.com/worldissues%20web/Unit%20population/What%20is%20the%20Demographic%20Transition%20Model.htm

Demographic Profile of Botswana, with and without AIDS, 2005 & 2020

http://www.iss.co.za/pubs/papers/107/Paper107.htm http://www.ifad.org/operations/regional/pf/aids_1.htm

Population Pressure

• Rising population density leads to…

– Malthus

• Land degradation

• Impoverishment

– Boserup/Simon

• Innovation

• Productivity improvement

• Environmental protection– Kates et al.

• Yes

Demographics: Approaches

• UN population projections– National (to 2050/2100)– By age group and gender– Urbanization (to 2035)

• National government projections• Cohort models• Note

– International labor migration is well-studied but not well-modeled

– Regional migration often treated with a “gravity model”

ECONOMICS

Economic Drivers

• Income– Level

• GDP: total economic value– Productive activities or

– Income or

– Consumptive activities

• GDP per capita

– Growth rate

• Prices– Level

– Volatility

– Terms of trade

• Economic structure– Agriculture and

mining, industry, services

• Structure of trade– Primary goods, manufactured

goods, services

• Investment– Inflows, outflows, domestic

• Heterogeneity– Between regions

– Between urban and rural

– Between groups

– Between individuals

Basins Along the Development Trajectory

Kemp-Benedict, Eric, Simon Cook, Summer L. Allen, Steve Vosti, Jacques Lemoalle, Mark Giordano, John Ward, and David Kaczan. “Connections between poverty, water and agriculture: evidence from 10 river basins.” Water International 36, no. 1 (2011): 125.

Savings, Investment, and Exports• A basic relationship in international economics is that savings

minus investment equals net exports:

• So, if savings are relatively low, and a country brings in FDI, it must be a net importer: it is importing machinery to make its goods

GDP as Consumption GDP as Production

Consumption+

Savings+

Imports

=

Consumption goods+

Investment goods+

Exports

C + S + M = C + I + X

S – I = X – M- Capital Account Current Account

Balance of Trade

Does it Happen in Reality? Yes…

Economics: Approaches

• Previous studies• National government

projections• Historical comparison

– Will be like the past– Will differ from the

past, but be like country/basin X

• Partial economic model– Growth model

• Capital accumulation• Exogenous or endogenous

growth

– Sectoral/partial equilibrium

– Empirical/econometric

• “Full” economic model– General equilibrium– Disequlibrium– Necessarily omit key

aspects of real economies

A Simple Growth Model

Y = Y agric+ Y non-agric = πagric Aagric+ πnon-agric Lnon-agric

Lnon-agric= Purb f active,urb r part, urb

yurb=Y urb

P urb

, y rur=Y rur

P rur

UN population projections

Historically based, World Bank, or scenario (e.g., Malthus-Boserup continuum)

Historically based, FAO, and scenario

SOCIAL

Social Drivers

• Norms and values

– Generational experience

• Social capital

• Social inequality

– Class/income

– Ethnic/linguistic/religious

– Gender

– Etc.

Global Social Drivers

• Contact with relatives who have moved away

• Exposure to foreign ideas and norms (television & radio, news, internet, school)

• Professional exchanges

• Tourism and other foreign travel (either outward or inward)

• Commodities and services

• Foreign domestic investment

• Foreign aid & international NGOs

Changing Norms

• Societies & people carry a bundle of (potentially conflicting) identities

• New identities can be added, and old ones attenuated (and even lost)

• Time scales:– Switching identities

• Can be very rapid• The raw material for “political entrepreneurs”

– Adding and losing identities• Typically slow, ~2 generations• Might only be hidden/latent

Inequality

• Generally does not change• When it does change, can be

– Internal reforms (gradual): US, UK, China

– Revolutionary reforms (rapid): Soviet Union, Cuba, revolutionary France

• Affected by– History (particularly colonial history)– Labor markets and economic structure– Politics

• Extractive vs. redistributive vs. “reinvestment”

Social: Approaches

• Narratives

• Formal qualitative models

• A handful of quantitative models, maybe

PULLING IT TOGETHER

Links

• Demographic transition– Economic level population growth

• Gravity model– Relative wage level & population migration

• Social capital– Inequality (& income level) social trust

• Globalization and development– Trade & labor migration norms & values

– Economic growth norms & values

Assets and Institutions Along the Development Trajectory

Kemp-Benedict, Eric, Simon Cook, Summer L. Allen, Steve Vosti, Jacques Lemoalle, Mark Giordano, John Ward, and David Kaczan. “Connections between poverty, water and agriculture: evidence from 10 river basins.” Water International 36, no. 1 (2011): 125.

Summary

• Importance– Demographic, economic, and social drivers are important and interconnected

• Future– Demographics: much built-in inertia, but the details are highly uncertain– Economics: considerable uncertainty and variability, with bounded rates of

change– Social: rapid change is possible, but typically change is on generational time

scales; future is highly uncertain, but there is a “globalism” syndrome

• Modeling– Might not be necessary: take off the shelf, use historical rates, rely on

narrative; otherwise, simple models may do the trick

• Responses and adaptation– Demographics: migration, innovation– Economics: diversification, storage, foreign reserves, capital controls, [price

supports, tariffs, subsidies, import controls]– Social: adoption/assimilation of imported ideas, resistance

ADDITIONAL

Trade Imbalances, 1960

http://rs.resalliance.org/2008/09/11/shipping-containers/

Trade Imbalances, 2000

http://rs.resalliance.org/2008/09/11/shipping-containers/