Dissecting the Poverty Trap

Without exception, population growth in rich countries has slowed to a crawl. Average fertility rates in Europe and North America, for example, have fallen to 1.5 to 3 births per woman. By contrast, average fertility rates in the world's poorest countries--say, Somalia, Yemen, and Uganda--are vastly higher, reaching more than seven births per woman. Must countries produce fewer children if they want to accumulate more wealth?

All available historical and contemporary evidence suggests that they must. Rich countries' transition from subsistence economies to sustained growth and prosperity was conditioned on a profound demographic shift--occurring in the 19 th century in Western Europe and throughout the 20 th century in East Asia--in which fertility rates fell dramatically. The last two decades have witnessed similarly sharp fertility declines in poor countries that are now showing solid signs of economic progress.

In Egypt, for example, fertility rates declined from 4.8 to 2.9 children per woman in the last 15 years. During the last decade, Egypt's average annual per capita income grew by 2.6%. During the same period, Tunisia's rate of population growth fell by more than 50%, to a European level of slightly more than two children per woman, while per capita income grew at an impressive annual rate of 3%. Botswana's incredible annual per capita income growth of approximately 13% in the last decade was accompanied by a decrease from nearly six children per woman to less than four.

Why is rapid population growth bad for a country's standard of living? The math is simple: more people means that (on average) everyone gets less. A growing population dilutes not only the accumulation of physical capital, but also human capital. The quality of children in poor households goes down as their quantity goes up, because poor families with many children are unable to invest enough in the education of each child to ensure that future adults benefit from a key determinant of economic success.