The birth rate vs the growth rate
Posted February 19, 2008on:
Stats NZ reports a marked increase in the NZ birth rate. There are three ways to view this: first, you could use it as Quest does to suggest that maths and equations are stupid and we should just trust the politicians’ instincts. Unfortunately for Quest, there is no statistical evidence for that position
The Standard claims that an increasing fertility rate is a signal of the good economic times brought about by the Labour government. This connection seems a bit results driven to me. Particularly so when the correlation between per-capita GDP and fertility is strongly negative worldwide. It may be the case that Labour’s policies have encouraged people to have children, but that’s hardly the same as signalling a rosy future for the NZ economy.
Finally, one might ask what economic theory has to say on the issue. While the theory on growth economics has a patchy empirical record, it does have an explanation for the negative correlation between fertility and GDP per capita. Essentially, higher fertility rates mean that the resources of the economy have to be spread across more people. Those people do create value but, since productivity has decreasing marginal returns, they don’t create as much extra capital as they consume. Thus, higher birth rates lead to an increase in GDP, but a lower GDP per capita in the long run. So perhaps the increased birth rate doesn’t bode so well for NZ after all.