Question

Consider an increase in the birth rate. Take this increase to be exogenous. Consider the impact in the Malthusian model. What is the initial impact on per capita income? What is the initial impact on the growth rate in per capita income? Explain the effects on per capita income and the growth rate in per capita income in the long run. Support your answers graphically.

Answer 1

With an exogenous increase in birth rate there will be an exponential population growth but also arithmetic food supply growth. According to Malthusian Model, through preventive (like family planning, late marriages, celibacy)and positive (like floods,earthquakes, wars,famines) checks ,the population would be controlled to balance the food supply with the population level.

Initially, with increase in birth rate there is fall in per capita income because more children in a family means lower the degree of education and GDP per capita of human population. An initial increase in birth rate together with the same rate of GDP increase will lead to impressive gains in per capita income.

The growth rate in the per capita income in the long run will tend to reduce birth rate in the long run. The primary cost of having children is the opportunity cost of the parents 'time in raising them. The growth rate in per capita income increase this opportunity cost. Higher per capita income increase the cost of having children and tend to reduce the number of children people want and thus to slow birth rate.