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Population Growth, Labor Supply, and Employment in Developing Countries

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  • David E. Bloom
  • Richard B. Freeman

Abstract

The economies of the less developed countries are about to face perhaps the greatest challenge in their histories: generating a sufficient number of jobs at reasonable wages to absorb their rapidly growing populations into productive employment. In terms of absolute magnitude, this challenge has no precedent in human history. In some respects, this challenge is also unprecedented in terms of its nature, given, on the one hand, the limited availability of natural resources in many countries and, on the other hand,the widespread availability of advanced technology.This paper examines the nature and magnitude of the principal effects of population growth on labor supply and employment in the developing economies of the world. On the supply side of labor markets, we discuss key features of the interrelations between population growth and the labor force. These include the lags between population growth and labor force participation; the independent effects on labor supply of accelerated population growth due to changes in fertility, mortality, and migration; patterns and trends in labor force participation rates; and gender differences in labor supply behavior. On the demand side, we describe and analyze the nature of labor markets in developing economies and attempt to identify the key factors that condition their labor absorption capacity. Descriptive statistics on the characteristics of developing country labor markets and on the relationships between population growth, labor supply, employment shifts, and growth of output per worker are presented and discussed.The key result of our analysis is that, despite the unprecedented magnitude of population growth and the existence of imperfections in labor markets, developing economies tended to shift between 1960 and 1980, from low-productivity agriculture to the higher productivity service and industrial sectors and, albeit with some exceptions, to raise real income per capita. With respect to their prospects for the remainder of this century, we also conclude that Malthusian disasters will not necessarily be the result of forecasted population growth, provided the developing economies can generate human and physical capital investments of comparable relative magnitudes to the past two decades. However, on the basis of past history, the middle-income developing countries are likely to perform better in this respect than the low-income countries, some of whom may need considerable help if they are to absorb increased population while shifting labor to more productive sectors and raising output per worker.

Suggested Citation

  • David E. Bloom & Richard B. Freeman, 1986. "Population Growth, Labor Supply, and Employment in Developing Countries," NBER Working Papers 1837, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1837
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    1. Anne O. Krueger, 1983. "Trade and Employment in Developing Countries, Volume 3: Synthesis and Conclusions," NBER Books, National Bureau of Economic Research, Inc, number krue83-1, July.
    2. Leibenstein, Harvey, 1978. "General X-Efficiency Theory and Economic Development," OUP Catalogue, Oxford University Press, number 9780195023800.
    3. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    4. House, William J & Rempel, Henry, 1976. "The Impact of Unionization on Negotiated Wages in the Manufacturing Sector in Kenya," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 38(2), pages 111-123, May.
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    Cited by:

    1. Durr-e-Nayab, 2008. "Demographic Dividend or Demographic Threat in Pakistan?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(1), pages 1-26.
    2. Lindh, Thomas & Malmberg, Bo, 2007. "Demographically based global income forecasts up to the year 2050," International Journal of Forecasting, Elsevier, vol. 23(4), pages 553-567.
    3. Bloom, David E. & Mahal, Ajay S., 1997. "Does the AIDS epidemic threaten economic growth?," Journal of Econometrics, Elsevier, vol. 77(1), pages 105-124, March.
    4. David E. BLOOM & Jocelyn E. FINLAY, 2009. "Demographic Change and Economic Growth in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 45-64.
    5. Sinding, Steven W., 1991. "Strengthening the Bank's population work in the nineties," Policy Research Working Paper Series 802, The World Bank.
    6. David E Bloom & David Canning, 2006. "Global Demography: Fact, Force and Future," RBA Annual Conference Volume,in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia.
    7. Bloom, David E. & Freeman, Richard B., 1988. "Economic development and the timing and components of population growth," Journal of Policy Modeling, Elsevier, vol. 10(1), pages 57-81, April.
    8. Bloom, David E & Williamson, Jeffrey G, 1998. "Demographic Transitions and Economic Miracles in Emerging Asia," World Bank Economic Review, World Bank Group, vol. 12(3), pages 419-455, September.
    9. David Bloom & David Canning & Günther Fink & Jocelyn Finlay, 2009. "Fertility, female labor force participation, and the demographic dividend," Journal of Economic Growth, Springer, vol. 14(2), pages 79-101, June.
    10. Ernesto F. L. Amaral & Daniel S. Hamermesh & Joseph E. Potter & Eduardo L.G. Rios-Neto, 2007. "Demographic Change and the Structure of Wages: A Demand-Theoretic Analysis for Brazil," NBER Working Papers 13533, National Bureau of Economic Research, Inc.
    11. David E. Bloom & Adi Brender, 1993. "Labor and the Emerging World Economy," NBER Working Papers 4266, National Bureau of Economic Research, Inc.

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