3. THE COMBINED EFFECTS OF BIRTH RATE AND INCOME INEQUALITY ON ECONOMIC
3.2 Empirical Results
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
Panama 1994-1997, 1999-2004, 2008, 2011
Peru 1993, 1995-2012
Paraguay 1998-2004, 2007, 2010-2012 El Salvador 1993-1995, 1997-1998, 2000-2010
Trinidad y Tobago 1994-2003
Uruguay 2001-2006, 2011
Venezuela 1992-1994, 2006-2007, 2009
3.2 Empirical Results
In my empirical analysis, I will use as my estimation method the ordinary least squares (OLS) regression with robust standard rrors to estimate the combined effect of birth rate and income inequality on economic development. Table 4.1 exhibits the results for the empirical models that show the variables that affect economic development in Latin America and the Caribbean.
In Model 1, the coefficient of the birth rate is negative and statistically significant. This result is consistent with the previous literature (Brander and Dowrick 1994; Ahituv 2001) that suggests that a country with a higher birth rates tends to have a lower level of economic development. In addition, the coefficient of the inequality is also negative and statistically significant. This finding is consistent with Persson and Tabellini (1994), suggesting that a country’s economic development decreases with a higher level of income inequality.
More importantly, Model 2, shows that the coefficient of the interaction of birth rate and* level of inequalityis negative and statistically significant. This indicates that, in a country with a high birth rate, the level of economic development tends to be much lower when this country has a higher
‧
level of income inequality. Put it differently, this result suggests that a country that has a low birth rate and a low level of inequality will have better economic development. This evidence suggests that it is necessary to consider the multiplicative effects of birth rate and income inequality when examining the factors that drive economic development.
The coefficient of birth rate and that of income inequality are positive and statistically significant in Model 2. The interpretation of these results is less straightforward because of the inclusion of the interaction term. Technically, the results suggest that a positive change of birth rate has a positive effect on economic development when income inequality equals zero, and a positive change of income inequality has a positive effect on economic development when birth rate equals zero.
Employment in the agriculture sector, is negative and statistically significant in both models. This result suggests that as employment in agriculture increases, economic development decreases. In other words, economic development is slower when there are more people working in the agriculture sector. This result is consistent with studies that argue that the poverty reducing effects of agriculture declines as countries get richer (Christiaensen and Demery, 2007; Ligon and Sadoulet, 2007).
Table 3.3 Effects of birth rate and income inequality on economic development in Latin America and the Caribbean
Variable Model 1 Model 2
Birth Rate -0.633***
(0.007)
0.152*
(0.067)
Level of Inequality -0.026***
(0.007)
0.072**
(0.027)
Birth Rate * Level of Inequality — -0.005***
(0.001) Government Expenditure on Education (%GDP) -0.010
(0.015)
-0.005 (0.015) Employment in Agriculture Sector -0.012*** -0.014***
‧
Also, received personal remittances (%GDP) is negative and statistically significant in both Models 1 and 2. This result suggests that as the amount of personal remittances as a percentage of gross domestic product increases, the economic development of a country will decrease. In other words, the more a countries economy rely on received personal remittances, the slower its economic development will be. This result opposes the new economics of labor migration (NELM). “NELM” argues that migration and remittances have positive indirect effects on incomes in migrant sending households, easing capital and risk constraints on local production. On the other hand, it supports Taylor, E.J. (1,999) argument, who explains that “economic environments that encourage out-migration also limit the potential for migrant remittances to stimulate development in migrant sending areas.” This result may be due to immigrant remittances truncating self-sustaining growth in the immigrant’s home county.
For the rest of the control variables, we find that the result for population is positive and statistically significant, suggesting that larger countries tend to have a higher level of economic development.
In addition, corruption does not have a statistically significant effect on economic development.
In other words, a country could have a higher or lower level of economic development regardless of its level of corruption. Moreover, we find that the coefficient of the level of democracy is
Level of Democracy 0.011
(0.010)
0.012 (0.010) Received Personal Remittances (%GDP) -0.023***
(0.004)
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
statistically insignificant, suggesting that a country’s level of democracy does not have a statistically significant effect on economic development.
The results also show that the coefficient of government expenditure on education (%GDP) does not reach statistical significance. It is possible that this education variable might be an intervening variable between my independent variable and dependent variable. However, the finding suggests that the coefficient of the interaction term is theoretically expected and statistically significant. In fact, the result does not alter much with or without the inclusion of the education variable in the model. Therefore, the education variable should not be an intervening variable that could greatly affect the result of my independent variable. Finally, the R-squared statistics in model 1 is of 0.762, and that in Model 2 is 0.773. Therefore, the models fit my data pretty well.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
4. A CASE STUDY: HONDURAS
4.1 Introduction
Honduras, is a Central American country with a territorial and maritime extension on 112,492 km2. As of April, 2018 it has an estimated population of 9,385,003. The population density in Honduras is 84 per Km2 (218 people per mi2). 53.4 % of the population is urban (5,031,591 people in 2018), and the median age in Honduras is 23.4 years.
Honduras is divided into 18 departments and 298 municipalities. Honduras ethnic group includes mestizo (mixed Amerindian and European) 90%, Amerindian 7%, black 2%, white 1%. Inside the Amerindian classification, we can find nine ethnic groups. From these nine ethnic groups, seven are considered indigenous: Tolupanes, Misquitos, Tawaka, Chorti, Lenca, Pech, Nahoa. Garifunas and Black English are the afro-descendent ethnic groups.
Honduras has not had many relevant studies focusing solely on itself as a country. Separating one of the poorest countries from the LAC region from the rest for more in-depth study can help the author and the readers to be able to visualize a clearer panorama of the variables that might be retarding economic development in the said country.
In Honduras, a diagnostic instrument called “Análisis de Situación de Población” translated to the English language by the researcher as “Analysis of the Population Situation” from now on in this research called “ASP” was initiated in 2008. The “ASP” was created hand in hand by key national actors between them the Presidential Commissioner for the reduction of poverty and the United Nations Population Fund. This “ASP” had as a goal to reveal the importance of the population behavior for the analysis, design, and implementation of public policies, poverty reduction, and respect to human rights. This project was impacted by the important political events that occurred
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
in Honduras in 2009. This political events, led the United Nations Population Fund to work by itself on the “ASP” final draft. Between the most important conclusions of this study, we can find factors affecting population behavior in Honduras, such as demographic transition, population and health, and lastly the population’s geographical distribution. During the research of this study, it was observed that Honduras was going by through a demographic transition defined first by the
“deceleration” of population growth and second by the transformation of structures by age. Results showed a reduction in the number of person’s dependent for every person in reproductive age.
Carias Chaverri (2010), described this tendency as a “bono demográfico” or “demographic bonus”
as translated to the English language by the Researcher. Carias Chaverri, explained that this demographic bonus would lead to a time were a major demographic incentive for economic growth would exist. He thought that this incentive would exist due to the highly growing participation of the population in working age in the populations total. He added that for this “demographic bonus”
to have its expected results, the implementation of correct economic and social policies was needed. Between these policies he mentioned the strengthening of quality and coverage of secondary school, giving more emphasis to the reproductive health of the young population, and lastly investment in programs that provide employment for the young population.
In the population and health factor, Carias Chaverri (2010) explains that even though health both general and reproductive have increased in quality, advances are considerably slower than those of other Latin American countries. Carias Chaverri, argues that deep inequality in health indicators are strong causes for the previously explained. The most affected population groups are those situated in geographical areas that have been excluded like rural areas. These rural areas contain the major numbers of population that are less educated and that have major income inequality.
Public Policies in this sector should search for the guaranteeing of medical attention to this part of
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
the population that has been traditionally excluded because of their geographical area, ethnicity, and age.
The last factor explained by the “ASP” is populations geographical distribution. There is no equal distribution of the population along Honduras 112,492 km2. The larger masses of population are concentrated in the capital city called Tegucigalpa, and in the industrial sector of the country like the city of San Pedro Sula in the department of Cortés. Carias Chaverri (2010) argues that poor rural migrants make poverty in the Honduran cities grow. Therefore, he states that the expansion on public services to these rural areas is of vital importance. Employment generation is also a must to help lower the migration indexes from the rural to the urban areas.
In the following sections I will discuss about religion, access to electricity, education, and the lack of sexual education in order to demonstrate that the influence of religious groups and not having access to basic needs, hence, observing high inequality, might increase a higher number of birth rates, therefore, affecting economic development.
4.2 “Ellos no tenían Televisor.”
The availability of public services is important to generate economic development. Having access to electricity and water is something that might be taken for granted in developed countries. But for developing countries is something that is taken care of due to the uncertainty of its possession.
For example, being part of the middle class in Honduras, guarantees you can pay for electricity service. Therefore, you would believe that because you pay for your electricity consumption you will always have it. The truth is that; energy blackouts in Honduras are more common than you would believe. Based on Modi, V., S. McDade, D. Lallement, and J. Saghir. (2006) argument that
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
“Access to energy facilitates the eradication of poverty”, the researcher believes this is an important topic to discuss.
Fisher, Ronald C. (1997), questioned before if there was a relationship between public services and economic development. The authors mentioned before, chose to test the following three types of public services: Highways (transportations), public safety and education. Fisher, Ronald C., found that transportation services and highway facilities were the services that had a greater relationship with economic development. Yet the authors did not choose access to basic public services such as access to electricity and water to test if there was a relationship with economic development.
The name of this section “Ellos no tenían televisor”, translated to English means “They did not have a television”. The purpose of naming this section this way is to emphasize the importance of having access to electricity in order to support development in a country. In Honduras, “ellos no tenían televisor” is a common expression to indicate why couples mostly in the rural areas, have such a big number of children. This due to the fact that as the parents didn’t have any other entertainment option at home, they turned their direction to having children.
The Researcher will show the available data related to the Honduran celebrated phrase “ellos no tenían televisor” explained before. The table below, shows the amount of homes surveyed in 2015 in the “Encuesta permanente de hogares de Propósitos Múltiples” by the national institute of statistics of Honduras, that had a television.
‧
Table 4.1 Does this home have a TV? Source: Encuesta Permanente de Hogares de Propositos Multiples 2015. INE, Honduras Does this home have a TV? Cases % Accumulated %
Yes 1514518 77.73 77.73
No 433901 22.27 100
Total 1948419 100 100
We can observe from the table number four, that there were 1,948,419 total cases in the year 2,015 in Honduras, surveyed in order to see if they had a television. From the 1,948,419 total homes surveyed in 2015, an amount of 1,514,518 cases which represent 77.73% had a television. Only 22.27% which equaled 433,901 cases in Honduras did not possess a t.v.
Table 4.2 Television possession * Poverty Classification. Source: Encuesta Permanente de Hogares de Propósitos Múltiples 2015.
INE, Honduras
Does this home have a TV? Poverty Classification
Extreme Relative Not poor Total
Yes 471899 403416 631071 1506386
No 303544 57759 71133 432437
Total 775444 461175 702204 1938823
Does not apply : 9596
Curiously, from table number five, we can see that a considerable amount of cases (471,899) under the extreme poverty classification has a television. Only 303,544 cases out of 775,444 cases in the extreme poverty classification does not have a television. Table five, clearly demonstrates that in every poverty classification there are more cases of homes possessing a television than not possessing one. Regrettably, there is no data concerning the birth rate of the people under the poverty classifications who possess a television in order to test if this saying is true or at least if there is a correlation in Honduras. What can be definitely concluded from table number 4 and five is the priorities of these families in their lives.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
Table 4.3 Access to Electricity in Honduras
Based on table number six, that shows access to electricity, by percent of the population originated from data retrieved from The World Bank for Honduras from the years 1990 to 2014. The average value for Honduras in 1991 was 69.76 percent with a minumum of 54.78 percent, and during the year 2014 a maximum of 88.65 percent. Also, based on information from the World Bank we can see that Honduras stood in place number 134 out of 196 countries in the world in 2014, on access to electricity.
Yet, a report from the National Electric Power Company in Honduras from March 2017, states that for December 2,016 the national coverage index is of 75% having grown from 72.35%
recorded by them in 2,014. Sub nationally, we find that the departments of Islas de la Bahia, Francisco Morazán, Comayagua, Cortés, Valle, Yoro, Copán, Colón, Atlántida, Intibucá, Ocotepeque, El Paraíso, and Choluteca have the largest coverage index of electrical energy in the country, superior or equal to 70%.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
The departments of Santa Bárbara, Lempira, Olancho, and La Paz, have a coverage index above 40% and under 70%. Lastly, the department of Gracias a Dios, has a coverage index of 48.8%.
The report states that 65% of the municipalities show a coverage index superior to 70%, and approximately 81% of the same show a coverage superior to 50%; 88% of the municipalities have a coverage index superior to 20%, and 92% have a coverage index superior to 10%, lastly and approximately 8% of the total municipalities are not being provided services by the National Electric Power Company or Empresa Nacional de Energía Eléctrica (ENEE).
The following table shows the coverage index of electric energy per department in Honduras.
Table 4.4 E.N.E.E., Honduras: Coverage Index of Electrical Energy per Department. Source: ENEE, March 2017
DEPARTMENT POPULATION RESIDENCES SUBSCRIBERS INDEX %
ATLÁNTIDA 457,031 138,518 101,701 73.42%
COLÓN 324,950 80,270 61,068 76.08%
COMAYAGUA 521,748 133,158 106,414 79.92%
COPÁN 388,810 107,934 82,571 76.50%
CORTÉS 1,653,699 467,593 371,422 79.43%
CHOLUTECA 453,360 114,994 81,162 70.58%
EL PARAÍSO 465,864 90,184 63,681 70.61%
FRANCISCO MORAZÁN
1,577,178 438,663 350,558 79.92%
GRACIAS A DIOS
96,384 8,695 4,242 48.79%
INTIBUCÁ 246,258 44,548 32,490 72.93%
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
ISLAS DE LA BAHIA
67,704 29,930 25,313 84.57%
LA PAZ 209,783 56,191 29,546 52.58%
LEMPIRA 339,310 69,295 44,484 64.19%
OCOTEPEQUE 154,251 47,328 34,373 72.63%
OLANCHO 545,835 112,560 70,777 62.88%
SANTA BÁRBARA
441,939 125,059 85,833 68.63%
VALLE 180,772 47,349 37,344 78.87%
YORO 596,138 148,970 115,739 77.69%
TOTAL 8,721,014 2,261,238 1,698,718 75.12
Based on the permanent survey of multipurpose homes known in Spanish as “encuesta permanente de hogares de Propósitos Múltiples, (EPHPM)” authored by the national statistics institute in Honduras, the country is classified in terms of population as: 54.11% urban and 45.89% rural and in residence terms its classifies as 56.65% urban and 43.35% rural.
The percentage of electric coverage in the urban area of the country is approximately of 83%, therefore, 17% of urban residences at national level do not have access to electricity. On the other hand, the percentage of electric coverage for the rural area of the country is of approximately 65%, leaving 35% of the rural residences without access to electricity. These 35% uses alternative methods to get light, between them we can mention: candles, gas lamps, and “ocote” which is a type of wood.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
In order to reach the optimal 100% of electrical coverage in the country, the report estimates that a total of USD $1,466,100,651.95 should be invested.
The “Encuesta de Demografia y Salud 2005-2006” translated to English by the Researcher as:
Demography and Health Survey from 2005 and 2006 showed that the rural area has a larger birth rate than the urban area. It also shows that the biggest percentage of teenage pregnancies are in the rural areas. Most importantly it showed that education does make a difference, because the biggest percentage of teenage pregnancies were also in the rural areas, where girls had less education.
Could it also be that the lack of access to electricity that impedes even having a television contribute to high birth rate indexes? Further study on this area is of importance.
4.3 The Religion Institution in Honduras and LAC
In Latin America, a region so marked and influenced by religion would be thought to have less inequality due to the fundamentals of religion specially those of its most dominant religion:
Catholicism. Nevertheless, the inequality levels stay high. In Honduras, religions are divided as follows Roman Catholic 46%, Protestant 41%, atheist 1%, other 2%, none 9% (2014 est.).
A study from Latinobarometro (2014), shows that Honduras is also one out of two Latin American countries (the other being its neighbor Nicaragua), in which the auto-classification of being a
“Catholic” has declined in the period from 1995 to 2013 by 29 percentile points. Protestantism has increased its numbers in 4 countries of the Latin American region, reaching over 30 percentile points in Honduras, Guatemala, El Salvador and Nicaragua. The Agnostics appear to be growing in percentage in Chile and Uruguay, and in the rest of the Latin American Region Catholicism remains dominant. Therefore, it can be concluded that this is only about a change from one religion to another. Not about secularization.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
The same study from Latinobarometro (2014), points at Honduras as the most emblematic case of change in religious beliefs in Latin America. Catholicism has lost 58 percentile points that it had as an advantage to Protestantism, and a total of 29 per centile points of Catholics as mentioned before. This result compared to Honduras in 1996, when it had a 76% of Catholics and a 12% of Protestants. There was no other religion able to compete with Catholicism in Honduras. Now, both Catholicism and Protestantism have almost the same power.
Religion as an Institution has a high trust percentage in most Latin American countries. Based on the Latinobarometro (2014) report, we can see that Honduras shares first place with Uruguay with an 87% of trust in the Church Institution. A very interesting fact provided by the report shows that the number of Catholics rise as the person’s level of education also rises from 64% in basic education to 72% in superior education. Protestant numbers decline 22% to 20% and the people
Religion as an Institution has a high trust percentage in most Latin American countries. Based on the Latinobarometro (2014) report, we can see that Honduras shares first place with Uruguay with an 87% of trust in the Church Institution. A very interesting fact provided by the report shows that the number of Catholics rise as the person’s level of education also rises from 64% in basic education to 72% in superior education. Protestant numbers decline 22% to 20% and the people