Tuesday, January 02, 2007

Africa, Demography and Productivity Change - a miscellany

This is another of those aide memoire posts.

Africa along with South America are two continents that I have not visited. I do monitor African development, South America less so

I was reminded of this by a post on Demography Matters looking at the latest Nigerian census results. Why does this matter?

On 23 November I published a post looking at Australia in its region, pointing to linkages between changing GDP, populations and Australian trade policy. This post focused especially on Australia in an Asia-Pacific context.

The post on Demography Matters reminded me of the need to take Africa into account. The post notes in part that Nigeria's population has been growing at an annual rate of 3.2 percent and now stands at just over 140 million, a 63 percent increase in 15 years.

I have not properly checked the African population figures. However, one estimate suggests that the number living in sub-Saharan Africa will rise from the current level of around 752 million to 1.7 billion people by 2050, or from 12 to 20 per cent of the world's population. These are sub-Saharan numbers only - in 1998 a further 173 million lived in the North African countries.

To put these numbers in perspective, by 2050 India is projected to grow to 1.81 billion, China to 1.42 billion. So what happens in Africa is going to be important to Australia.

The Demography Matters Nigeria post raised another issue that had been in my mind.

The world's population is projected to grow from 6 528.1 million today to 9 404.3 million in 2050. In 2050 my daughters will be 61 and 63 respectively, so they will (God willing) be there.

Continued action is clearly needed to rein in population growth if we are to feed, cloth, educate, employ and house this population. Now here we have a conflict between the need at national level to increase birth rates in certain countries facing aging populations and actual population decline in some cases (this is already a significant public policy issue in those countries) and the broader need to control population growth.

Another issue raised by the Demography Matters post in question is the nature of the interface between population change and economic growth. Let me put this very crudely and without argument in an Australian context.

Productivity growth is a key requirement to income growth in those countries like Australia where existing resources (people, land, capital) are already reasonably fully utilised.

Australia had relatively low productivity growth during the fifties and sixties, so we slipped in the world per capita income rankings. Low productivity growth was attributed to structural inefficiencies within the economy and especially those associated with tariff protection.

Over the last thirty years we have experienced much higher productivity growth, leading to significant increases in average per capita incomes. Conventional wisdom attributes this to removal of structural impediments. While I have no doubt that removal of structural impediments was important, I am now beginning to wonder about the accuracy of the conventional wisdom.

In an earlier note I pointed to some of the problems with productivity measurements. In this context, to what extent is the increase in productivity simply a demographic dividend independent of the impacts of structural change?

I don't have time to try to argue this now. I am simply getting the point down.

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