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An econometric simulation of the effects of fertility control on the economy of Taiwan

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Title: An econometric simulation of the effects of fertility control on the economy of Taiwan
Authors: Tung, Shui-liang
Keywords: Fertility, Human -- Economic aspects -- Taiwan
Issue Date: 1979
Abstract: The purpose of this study is to examine the effects of three fertility trends--normal, low, and very low--on economic growth, and to estimate the economic value of averted births in terms of market goods. To do this, we have constructed a disaggregated economic-demographic model which treats demographic variables as endogenous. The model presents a set of theoretically valid equations. Labor force participation rates are a function of (1) wage rates and (2) current and past fertility. Per capita food consumption, not per capita income, is used as proxy for nutrition. Because many investments do not begin to contribute to production for the first few years after they appear in the capital stock owing to planning and construction lags, effective capital input instead of capital stock is used in the production function. The effects of age and sex composition are minimized by using the number of equivalent adult consumers in the consumption function and by setting up equations for age and sex-specific fertility, survival, and labor force participation rates. The model, involving a high degree of interrelationship among the variables, is a neoclassical open-economy growth model. Except for the depreciation equation, which was estimated by ordinary least squares, all the behavioral equations were estimated by using the two-stage principal-component method. The validity of the model was evaluated by performing historical simulation; to do so, the model was solved by the Gauss-Seidel method because the model is non-recursive and includes nonlinear variables. The results are all reasonable: (1) the root-mean-square percentage errors are all low regardless of the initial period of the simulation, and (2) the RMS forecast errors are all as small as those of historical simulation. In estimating the gains from fertility reduction obtainable by the participating families the following relations were taken into account: (1) the increase in output that would otherwise have been produced by the averted children, (2) the increased output derived from increased female labor force participation, (3) the consumption averted by the fertility reduction, and (4) the difference in consumption patterns by age and sex. The demographic findings show that, because of the young age structure, even if fertility were to reach replacement level immediately, the population in Taiwan would still increase by more than 94% before it stabilized. The economic findings indicate that the low and very low fertility trend assumptions eventually produce slightly smaller GDP and smaller GDP per capita than the normal fertility trend assumption. However, the low and very low fertility assumptions generate substantially larger GDP and larger GDP per capita in the near future up to 40 to 60 years. Consequently, the economic value per averted birth obtainable by the participating families is still positive--nearly $20,443 (1971 N.T. dollars). This study yields important policy implications. Because lower fertility has immediate economic advantages, it may be beneficial for a developing country with a high birth rate to reduce fertility in order to break out of the low-income "trap" as soon as possible. The normal and the lower fertility trend populations all generate very high GDP per capita in the long run. It therefore may not be of primary importance that the lower fertility trend populations eventually produce slightly smaller GDP per capita than does the normal fertility trend population; it may be of much greater importance, from the economic point of view, for a developing country to break out of poverty.
Description: Photocopy of typescript.
Thesis (Ph. D.)--University of Hawaii at Manoa, 1979.
Bibliography: leaves 132-140.
xi, 140 leaves ill. 28 cm
Rights: All UHM dissertations and theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission from the copyright owner.
Appears in Collections:Ph.D. - Economics

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