Ka-fu Wong © 2003 Project A - 1 Dr. Ka-fu Wong ECON1003 Analysis of Economic Data

Ka-fu Wong © 2003 Project A - 2 A test of the relation between fertility rate and mortality rate? Ka-fu WONG (Presenter) & Alice LEE (Writer)

Ka-fu Wong © 2003 Project A - 3 Are mortality and fertility related? Demographers have pointed out that in many cases mortality decline precedes fertility decline, which suggests a causal link from falling mortality to falling fertility. The model of Barro and Becker (1989) implies falling mortality rates tend to lower the cost of having a surviving child, hence fertility actually increases, not decreases, as mortality declines. (Instead of emphasizing mortality decline, the Barro-Becker framework points to the quantity-quality tradeoff as an explanation for fertility decline: parents choose to have smaller families in order to invest more in the education of each child.) Barro, Robert and Gary S. Becker (1989): “Fertility Choice in a Model of Economic Growth,” Econometrica 57(2):

Ka-fu Wong © 2003 Project A - 4 Are mortality and fertility related? Kalemli-Ozcan (2002) argues when mortality is stochastic and parents want to avoid the possibility of ending up with very few (or zero) surviving children, a “precautionary” demand for children arises. Extending the theoretical model of Barro and Becker (1989), Doepke (2002) predicts a negative relationship between mortality and fertility. Kalemli-Ozcan, Sebnem (2002) “A Stochastic Model of Mortality, Fertility, and Human Capital Investment.” Forthcoming, Journal of Development Economics. Doepke, Matthias (2002): “Child Mortality and Fertility Decline: Does the Barro-Becker Model Fit the Facts?” Manuscript, UCLA.

Ka-fu Wong © 2003 Project A - 5 Are income and fertility related? Burdsall (1988) suggest the so-called Norm curve, which describes fertility as a monotonically declining function of per capita income. Birdsall, N. (1988): “Economic Approaches to Population Growth”, in Handbook of Development Economics, by H. Chenery and T.N. Srinivasan, Eds, Vol. 1, Elsevier: Amsterdam.

Ka-fu Wong © 2003 Project A - 6 Theme of this project We use fertility data across countries to estimate the relationship between fertility and mortality and per capita income.

Ka-fu Wong © 2003 Project A - 7 Data sources and description World Development Indicator (WDI) 2002, available from the HKU main library. Time: year 2000 only. 172 countries (out of 207) with relevant variables GDP per capita (in 1995 US$) – a proxy for income per capita. Infant mortality rate (per 1,000 live births) Fertility rate (births per woman) Drop 35 countries: 32 countries do not report GDP per capita. Additional 3 countries do not report fertility rate. Also consider adult illiteracy rate but substantial number of developed countries (such as UK and US) do not report this variable. Not considered in our final analysis.

Ka-fu Wong © 2003 Project A - 8 Descriptive statistics: Fertility rate count172 mean3.15 Standard deviation1.601st quartile1.77 minimum1.02median2.63 maximum7.223rd quaritle4.42 range6.20interquartile range2.64 Hong Kong 34.3% countries below replacement fertility rate: (=2.1).

Ka-fu Wong © 2003 Project A - 9 Descriptive statistics: Mortality rate count172 mean38.76 Standard deviation35.991st quartile10.01 minimum2.90median23.60 maximum rd quaritle60.00 range150.70interquartile range50.00 Hong Kong

Ka-fu Wong © 2003 Project A - 10 Descriptive statistics: GDP per capita count172 mean6, Standard deviation10, st quartile minimum115.88median1, maximum rd quaritle5, range interquartile range4, Hong Kong Luxembourg

Ka-fu Wong © 2003 Project A - 11 Scatter plot: fertility vs. GDP per capita

Ka-fu Wong © 2003 Project A - 12 Scatter plot: fertility vs. mortality

Ka-fu Wong © 2003 Project A - 13 Regression model I: Fertility= GDP Stderror(0.1263)( ) P-value[5.71E-67][5.18E-11] Economically, we expect fertility rate to lower by per woman when the per capita income increases by US$1000. Statistically different from zero at 1% level of significance.

Ka-fu Wong © 2003 Project A - 14 Regression model I: ANOVA SourceSSdfMSFp-value Regression E-11 Residual Total R-square The explanatory variable (per capita income) explains 22.5% of the variation in fertility rate. Rejects the hypothesis that all coefficients are jointly zero.

Ka-fu Wong © 2003 Project A - 15 Regression model II: Fertility= GDP mortality Stderror(0.1230)( )(0.0020) P-value[9.44E-32][0.1446][2.83E-42] Economically, holding mortality rate constant, we expect fertility rate to lower by per woman when the per capita income increases by US$1000. Economically, holding per capita income constant, we expect the fertility rate to rise by per woman when mortality increases by 1 infant death per thousand births. Statistically different from zero at 1% level of significance. Not statistically different from zero even at 10% level of significance.

Ka-fu Wong © 2003 Project A - 16 Regression model II: ANOVA SourceSSdfMSFp-value Regression E-50 Residual Total R-square0.742 The explanatory variables together explain 74.2% of the variation in fertility rate. Rejects the hypothesis that all coefficients are jointly zero.

Ka-fu Wong © 2003 Project A - 17 Regression model III: Fertility= mortality Stderror(0.0919)(0.0017) P-value[7.89E-42][1.86E-51] Economically, we expect fertility rate to increase by per woman when mortality increases by 1 infant death 1 per 1000 birth. Statistically different from zero at 1% level of significance.

Ka-fu Wong © 2003 Project A - 18 Regression model III: ANOVA SourceSSdfMSFp-value Regression E-51 Residual Total R-square The explanatory variable (per capita income) explains 73.9% of the variation in fertility rate. Rejects the hypothesis that all coefficients are jointly zero.

Ka-fu Wong © 2003 Project A - 19 Conclusion Fertility rate is strongly directly related to mortality rate. When mortality rate is included, the explanatory power of income per capita on fertility rate seems small. Cautions: Although the model setup seems to suggest a low mortality rate will cause a low fertility rate. The reverse could be true. Countries with a low fertility rate may spend more on infant survival and hence a low mortality rate. The true relationship may not be linear, e.g., Strulik and Sikandar (2002). Strulik, Holger and Siddiqui Sikandar (2002): “Tracing the income-fertility nexus: Nonparametric Estimates for a Panel of Countries,” Economics Bulletin, 15 (5), pp. 1-9.

Ka-fu Wong © 2003 Project A - 20 A test of the relation between fertility rate and mortality rate? - End -