The Basic Kelley Model
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Contents:
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| The Effect of Per Capita Income
Kelley assumed that at low levels of per capita income, the rate of growth
of per capita income would fall (as per capita income rose as predicted
by the neoclassical growth model). At middle levels of per capita income,
the growth rate of per capita income would be positively associated with
per capita income (as predicted by endogenous growth theory). At very high
levels of per capita income, the relationship would again be inverse as
predicted by neoclassical growth theory. |
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| The Partial Effect of Population
Growth
If there were no change in per capita GDP (Y/P), then an increase in
the rate of population growth would reduce the rate of per capita income
growth. The magnitude of the effect depends on the time period. In the 1960s,
(T1) the slope was less than 1. In the 1970s (T2) it was more than 1. In
the 1980s, (T3) the effect was strongest. The slope was more than 2 as predicted
by the Coale -Hoover model of India. |
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| The Interaction Effect
Kelley beleived that it was possible that population growth might have
harmful effects on living standards at low levels of per capita income and
have beneficial effects at higher levels of per capita income. Thus the
interaction effect which treated the growth in per capita income as a function
of the product of the growth rate of population and the level of per capita
income was positive for all three time periods. |
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| Effect of a Lower Population
Growth Rate
The blue line in this graph shows the effect of per capita income on
the growth rate of per capita income assuming that the growth rate of population
remains constant at the level of the developed countries (low). The red
line shows the effect of per capita income on the growth rate of per capita
income assuming that the growth rate of population remains constant at the
level of the less developed countries (high). The econometric results indicate
that Third World countries would benefit from lower rates of population
growth, while the Industrialized countries might benefit from higher rates
of population growth. |
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