Chapter 5Public Policy

In Chapter 2, I argued that the most important factors for economic growth and innovation are demographic factors. These include the size of the population, the geographic concentration, and the aging makeup of the population. In this chapter, I will discuss policy issues related to each of these demographic factors.

After the Second World War, most developed countries experienced a baby boom, and most developing countries improved their healthcare systems and significantly reduced their infant mortality rate. Consequently, the population of the world experienced unprecedented growth during the 1960s and 1970s, and a widespread global concern was that overpopulation would be disastrous for the environment and the economy.

Against this background, many developing countries started to adopt fertility reduction policies. For example, Vietnam implemented a two-child-only policy. India tried to impose forced sterilization after a woman had given birth to two children, but had to abandon this policy after strong opposition from voters. China implemented the extreme policy of only allowing one child for most of its urban residents.

About a generation later, the fertility rate dropped sharply globally, as many of these countries became wealthier and more urbanized. During the 1980s and 1990s, the fertility rate in many countries—including Japan, Korea, and Singapore—dropped below the replacement level; consequently, they started to reverse their fertility reduction ...

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