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## **1.** RATIONALE FOR BANK INVOLVEMENT **IN POPULATION2**

9. The Bank began to discuss population issues systematically in the late<sup>1960s, and made its first family</sup> planning loan in 1970. J;sp .e a br,%d agreement among governments<sup>and most observers that population</sup> growth has generally negative consequences for many aspects of development,<sup>there is less agreement among</sup> development economists on the effects of rapid population growth<sup>on economic growth in developing</sup> countries. Under these circumstances, what is the rationdle for the<sup>Bank to continue to be corcerned with</sup> this issue?

# Thg Maroeconomic Consequences of Rapid Population Growth

10. The assumption that rapid population growth is detrimental to<sup>e,-onomic growth prevailed in the</sup> mains. am development literature for much of the postwar period -- as<sup>long as lack of capital (and savings)</sup> coupled with surplus labor in agriculture were seen as the major constraints<sup>to economic growth. By the late</sup> 1970s, however, with attention shifting to the efficiency of resource use<sup>and policies to promote efficiency,</sup> the strength of this causal link began to be questioned. Analyses<sup>throughout the 1980s have been</sup> characterized as "revisionist" Malthusian: population growth is viewed as<sup>only one among several factors that</sup> slow development, and as a factor the effect of which, though negative,<sup>varies greatly in magnitud. depending</sup> on setting and circumstance.' 11. The more recent view is of population change as the aggregate outcome of<sup>many individual decisions</sup> at the micro or family level, and thus as one aspect of a larger complex<sup>system. The micrD or family-level</sup> decisions are made in response to signals provided by the larger system;<sup>these family decisions should be</sup> presumed to maximize not only individual welfare, but also social welfare,<sup>unless there are clear market</sup> failures. Among economists, di"erences on the negative effects of rapid<sup>population growth depend on</sup> differences about the pervasiveness and relevance of market failures.<sup>The report of the National Research</sup> Council of the National Academy of Sciences (1986), for example,<sup>while noting the ability of the marIket and</sup> institutions to adjust, also emphasizes that in many developing<sup>countries, institutional and market problems</sup> are pervasive and the process may be slow.' The World Bank _World_<sup>_Development Report_(1984) emphasizes</sup> the market and institutional failures. It notes, for example, the effects of<sup>rapid population growth and high</sup> fertility on the "congestion" of government services such as health and<sup>education services, which for other</sup> reasons, tend to be subsidized; and the effects of rapid population growth<sup>in settings where property rights</sup> are poorly defined.

12. So the long debate over population growth and development appears to<sup>be entering a new phase. The</sup> emphasis is now on the interaction of rapid population growth with<sup>market and institutional failures jo</sup> 2 This section draws heavily on N. Birdsall, "Economic Analysis of Rapid<sup>Population Growth,"</sup><sup>_Research_</sup> _Observer,_ January 1989.

3 See for example Kelley, 1988.

4Tbe National Academy of Sciences (NAS) report concludes that rapid population<sup>growth does have some</sup> negative effect on economic growth in developing countries. But it<sup>also notes that these effects, based on</sup> the extremely limited evidence availab<sup>1</sup> e, vary greatly among countries.<sup>The principal conclusion of the NAS</sup> report is that the state of evidence on the consequences of rapid population<sup>growth is poor.</sup>