Question

a) With is the relationship between TFR and GDP and to what this relation may be attributed to?

b) Using the example of a life insurance premium across age and gender groups, explain how it reflects the concept of life expectancy.

c) Explain why the population structure (composition of fertility and mortality) varies between countries.

Answer 1

(a) With is the relationship between TFR and GDP and to what this relation may be attributed to?

The burden on a child can easily be understood economically speaking from the expenses that will be incurred on him or her over a period of time respectively.

Each Child requires proper nurturing and care, and to have a reasonable standard of living the parents will have to spend a significant part of their total income for the same.

This brings us to the relationship between Total Fertility rate and the Gross Domestic Product of an economy. Since, it is we people that form a country in general, the addition of a child in the family has a deep impact on the overall spending and thus the GDP gets effected.

The additional expense of bearing another child has a large impact on the overall family in terms of the capital spent on bringing adequate facilities to the child. Due to this expenditure it can reasonably be assessed that there is a negative relationship between total fertility rate and GDP of any economy. Which means that as the fertility rate which is also an indicator of total population increases, the GDP of the country suffers and goes down.

In countries such as the United States for example the women tend to have a child ratio of 2 or less than two. Whereas developing or underdeveloped countries across the globe tend to have a trend of 3 or more also.

The reason is that due to an additional child much capital is lost by the economy in nurturing him/her which lays a big stress on the overall health of the country in terms of its GDP.

Also researches have indicated that countries with GDP of 10,000$ or more tend to have a very low fertility rate since people are aware about the added costs of bearing an extra child and can plan their families in a better manner respectively.

b) Using the example of a life insurance premium across age and gender groups, explain how it reflects the concept of life expectancy.

Life insurance premiums are based on the demographics of a society and are indicative of the life expectancy of a particular group or society at large.

The basic idea behind the pricing of a life insurance premium is of averages. They consider the fact that on an average, the life expectancy of a healthy male/female or a group would be a certain amount of years & therefore they price their premium in such a manner that only a small percentage of the total insured would turn up for redemption else it can cause major losses to the company.

Therefore, in areas wherein the life expectancy is lower, the insurance premiums are expected to go up and vice versa. Also, in areas where accidental deaths or deaths due to drugs etc. are higher, the insurance premium is bound to go up.

This is also a rationale behind insurance companies checking on all health related parameters of the end user to analyses the risk factor and thus deciding on the premium which the customer must pay.

Example:-

Life insurance premiums for women tend to be higher than men in terms of how there perceived risk during child birth is relatively higher. Also, across most states where cannabis is legal in the United States it is due to this perceived risk that premiums are higher.

Further, as a person ages and the risk factor increases, so does his insurance premium since his chances of death are relatively higher.

c) Explain why the population structure (composition of fertility and mortality) varies between countries.

The basic reason for the differences in population structure across most countries is because of its rates of fertility and mortality respectively.

In areas where the rate of fertility is relatively higher, the population structure is such that the youth tends to dominate the population structure. This is the result of the difference in population of the old and the young ones respectively. Example India where the current population structure is such, that fertility rates are high,

Further, in areas where the mortality rate is high, the same trend is possible, since people crossing the age of 60 or more is relatively lower and the average person may die in this case earlier.

Aside, in a country where the mortality rate is low, that is a higher percentage of people survive than are actually born, the population structure would indicate a higher percentage of people in their old age. Example: - The population structure of Japan indicates this phenomenon.

Please feel free to ask your doubts in the comments section if any.