Fertility Rate and Constant GDP per capita

Diego Mendez-Carbajo, Federal Reserve Bank of St. Louis,
Author Profile

Summary

Students will search for data on fertility rate and constant GDP per capita, mapping them and underscoring the reasons for lower fertility rates in richer countries.

Context for Use

This activity is appropriate for Principles, Introductory Microeconomics, and for elective courses such as Labor Economics and Development Economics.

The data for this exercise is provided by the World Bank. When adjusted for the price level, the per capita GDP figures are labeled "constant" which is equivalent to "real" in introductory textbooks. This should be brought up to students as a point of clarification.

Background knowledge on the topic can be supplemented through the materials listed in the "Information given to students." Instructors are encouraged to design Just-In-Time-Teaching questions to improve student preparation and target instruction (See here: https://serc.carleton.edu/econ/justintime/index.html).

Students must be able to follow directions on the GeoFRED site: search for data; modify the units; change the date range; choose map colors; and edit the legends.

To preserve class time for activities in which there is great benefit in face-to-face interaction, the instructor could copy the map-building instructions into a handout and assign that work as out-of-class preparation.

No class size limitations.
Time needed for the activity: 30 minutes.
Should not need more one class period.
Self-standing activity.

Overview

Students search for data and visualize them in GeoFRED, the Federal Reserve Bank of St. Louis online mapping tool. The learning goals of this activity are: (1) to observe patterns in economic data and note differences across geographical areas; (2) hypothesize the reasons for those patterns and differences.
The intended outcome of the activity is the illustration of the relationship between fertility rate and constant GDP per capita and the potential explanations for this relationship.

Expected Student Learning Outcomes

In this exercise students will be able to:
1. Observe an inverse relationship between fertility rate and constant GDP per capita across nations;
2. Evaluate the reasons for the observed inverse relationship between fertility rate and constant GDP per capita.

Information Given to Students

Go to the following web address and watch the video: https://www.worldbank.org/en/news/feature/2017/05/05/falling-fertility-in-botswana-provides-chance-for-future-economic-growth

On the GeoFRED website, https://geofred.stlouisfed.org/, create a map by following these instructions:
1. Click on "Build New Map"
2. Click on "Tools"
3. Click on "Choose Data" and select "Region Type: Nation"
4. Select "Data: Fertility Rate"
5. Select "Date: 2016"
6. Click on "Choose Colors" and select "Single Hue: purples"
7. Click on "Edit Legend" and select "Number of Color Classes: 5"
8. Enter "2.1" in the top value box, "3" in the second value box from the top, "4" in the third value box from the top, "5" in the third value box from the top and "8" in the bottom value box.
Open a new tab browser, go to the GeoFRED website, and create a second map by following these instructions:
1. Click on "Build New Map"
2. Click on "Tools"
3. Click on "Choose Data" and select "Region Type: Nation"
4. Select "Data: Constant GDP per capita"
5. Select "Date: 2016"
6. Click on "Choose Colors" and select "Single Hue: purples"
7. Click on "Edit Legend" and select "Number of Color Classes: 5"
8. Enter "1000" in the top value box, "10000" in the second value box from the top, "20000" in the third value box from the top, "40000" in the third value box from the top and "108000" in the bottom value box.

Examine the maps and hypothesize the reasons for the observed relationship between fertility rate and constant GDP per capita.

Rank the following factors in order from the most likely to influence the observed relationship between fertility rate and constant GDP per capita to the factors least likely to influence the observed relationship.
A. Infant mortality is higher in poor countries than in rich countries;
B. Children require more education to be successful in a rich country than in a poor country;
C. The cost of raising children in poor countries takes up a greater share of household expenditures than in rich countries;
D The opportunity cost of time raising children in poor countries is lower than in rich countries.

Work in two phases: first, identify and discuss the most important factor; second, identify and discuss the least important factor.

Teaching Notes and Tips

Figure 1. 2016 Fertility Rate, Total by Nation. http://geof.red/m/hqG

Figure 2. 2016 Constant GDP per capita by Nation. http://geof.red/m/hqJ

What prefatory remarks should set up the application exercise?
The decision to have children is influenced both by cultural and economic factors. Rather than simply tell the students that women in different countries have different numbers of children, this exercise allows students to compare total fertility and constant GDP per capita (or income). The goal of this exercise is to encourage students to think about the various reasons behind such negative correlation.

What kinds of strategies are recommended for facilitating reporting and inter-group conversations?
The instructor should direct student groups to work in two phases: first, have team reporters identify and discuss the most important determinant factor; second, have team reporters identify and discuss the least important determinant factor.

What kinds of follow-up questions are recommended for facilitating the debriefing conversation among team reporters?
On the first map, the darker purple colors indicate countries where the fertility rate is high. On the second map, the darker purple colors indicate countries where the constant GDP per capita (or income) is high.

The reasons for the negative correlation between income per capita and fertility rate are varied. High infant mortality in poor countries would raise the fertility rate so to increase the odds of surviving children; Children require more education to be successful in richer countries, thus being more expensive to raise; Giving up high-earning occupations in order to have children –the opportunity cost of having children- is less likely in rich countries than in poor countries. Finally, although it is relatively more expensive to raise children in poor countries than in rich countries –fewer resources have to be stretched thinner- high relative scarcity and low fertility are not observable in the maps.

There is no clear ranking among the reasons for the negative correlation. The logic of every team's argument for the ranking should be evaluated by the instructor.

What points should be emphasized in the instructor's summary remarks to conclude the exercise?
A. The "replacement rate" for population is 2.1 children per woman;
B. Although fertility is 2.5 children per woman globally, there are wide regional differences. Fertility in Africa is 4.7 children per woman and fertility in Europe is 1.6 children per woman;
C. Country by country (e.g. the U.S.) fertility has declined when economic prosperity has increased;
D. The economic pressure of raising and educating children in rich countries has repeatedly counterweighed the cultural and historical traditions.

Assessment

Since there is no universally accepted ranking order of the factors linking fertility rates and constant GDP per capita, the instructor would judge team answers based on the quality of arguments presented:
1) A correlation between low fertility rates and high constant GDP per capita is observed;
2) High fertility rates and fast population growth are not associated with a prosperous economy;
2) Country-by-country compelling arguments are presented in the ranking of reasons for the observed correlation.
The following essay question could be asked as a follow-up to the exercise:
Low fertility rates and high constant GDP per capita are correlated. What economic argument(s) can explain this relationship? How can rich countries "replace" their aging populations? Explain your argument(s) carefully.

References and Resources

https://www.un.org/en/development/desa/population/publications/pdf/fertility/world-fertility-patterns-2015.pdf
https://www.stlouisfed.org/on-the-economy/2016/december/link-fertility-income