continuous production of extractive commodities promotes or inhibit economic development

Determining whether the continuous production of extractive commodities promotes or inhibit economic development remains as one the persistent questions in the field of development economics. Oil production remains one of the lucrative commodities to in the economic world with oil producing countries experience positive economic returns most of the time from oil marketing or exports of crude and refined oil products. The main belief that as the societies become more urban and industrialized, and the introduction of technology sets into the economic and social life, then the birth rate will go down. According to the socio-demographic theory, it sounds reasonable to create the assumption that, under the similar condition Saudi Arabia birth rate will have already declined. However, countries like Iran which produce oil production have registered high fertility rates among the underdeveloped countries. Therefore, deviation from closer socio-demographic theory requires deeper study

There exist three lines of thoughts in consideration of the relationship between fertility and economic development. The first line contends that economic development slows down fertility. This view seems well articulated in the demographic transition theory, which asserts that the population processes of a country rely on its industrialization platform and, by the latter, on its economic development level. The second line of thought implies that economic development supports fertility. This means that improved employment opportunities escalate the fraction of persons getting married and decline the average age of first marriage. Consequently, the changes in the patterns of marriage lead to heightened fertility rates. The third line of thoughts looks at the long-run and the short-run theory approach initiated by two scholars (David Sheer and Elsa Turner back in the year 1966. This theory asserts that in the short –run a sudden rise in economic development level seems to result in higher fertility but in the long-term the escalating levels of economic development initiate the operation of other forces. These forces will tend to minimize fertility. Such long-term force comprises

One of the most important factor that affect almost all aspects of our economic lives today is the crude oil productions. Therefore, they are considered among the most watched and analyzed economic indicators. Crude oil production has a direct impact on the volume of countries’ exports and imports as well as the rate of foreign investments. Over the years, the explanation of the relationship between world crude oil productions and their effects on the fertility rate has engaged the attention of many economists and researchers, and this has received considerable importance in empirical research.

Understanding the relationship between the population fertility rate and oil production may help in the interpretation a phenomenon known as “resource course”. The concept argues that natural resource affluence or endowment, in particular, oil slows down the per capita GDP in a given country’s economy. The basic regression that supports the curse indicates that countries with a good endowment of natural resources have a lower mean per capita GDP growth rates relatively to their GDP over a given period. Understanding the impact of oil production on fertility rates will enhance our knowledge of economic development. Some researchers argue that the high growth rate of a population can cause detrimental effects on the economic development of a given country. Kelly and Schmidt (1994) indicated that their study exhibited a negative kind of relationship between population growth and per capita growth in the 1980s.

Most of these studies have concentrated on the relationship between oil production and fertility rate especially, United States of America. In contrast to this large number of studies on United States of America, research focusing on the impact of oil productions on the fertility rates in developing countries especially the Saudi Arabia is limited. From a theoretical perspective, per capita GDP growth rate and the fertility rate are directly related. Some results of the related study in other countries have shown a significant relation between per capita GDP growth rate and fertility rate statistic. Thus, our main objective is to test whether there is a causal relationship between fertility rates and oil production. Additionally, it fills the research gap in the oil price-output literature related to the Saudi Arabia.

Literature review

This part of the paper gives a critique of related studies that have various researchers carried out in the past. Not much of the research has focused on the effects of the oil production on fertility rates in the oil producing countries but more so no study has taken place in Saudi Arabia. Therefore, this review of literature will focus on the general studies on the effects of oil production on fertility rates. Theoretically, oil production will result in increased economic development. Most of research focuses on the effect of economic recession on fertility.

However, as a result of several personal preferences and in other cases opposing effects, the direct translation of this evidence into aggregate-level inferences of the expected consequences of fertility recession. Personal decisions on fertility decisions at times of economic recession will mostly lie on the boundaries of age, gender, migrant, ethnic and social network, and maybe the number of kids. Also, the various opportunity costs of childbirth planning are not influenced by the recession in a similar way to the various social networks. Since most of the economic recessions in the old days last for just a short period of time, their effect on the fertility rates did not last for long (Lee, 1990). Due to these short-run effects it becomes too complicated to distinguish changes in the level of fertility and fluctuations in fertility timings.

Oil production will lead to changes in the social status of the populations since the industry cannot provide job positions to every individual in the country. Most of the research was carried out in Central and Eastern Europe. According to Ranjan (1999) who develop a theoretical model, suggested that the reducing fertility rate in Eastern and Central Europe came as a result of optimal reaction to the uncertainty of the income that arose as a result of the transition to the economy. Findings by Perelli-Harris (2006) indicated that subjective well-being affected positively on the childbearing desires and the real bearing of a child of married women with one or more kids. The uncertainty of the economy also influences fertility in an indirect manner. Individual with different social background react differently when recession hits an economy. According Oppenheimer (1994), the importance given to male income and stability of a job position for the family creation may result in them not finding a stable partner. For female, who get higher education react to unemployment by developing postponement strategies, more so if they have no child while those with low education retain their tendency to get into motherhood under uncertain economic period.

To understand population growth we consider three logical components; mortality, fertility, and immigration. Considering fertility, researchers have a look at a vast spectrum of models that base on technological, cultural, sociological, and even economic factors as likely determinants of fertility (Cohen, 1995). According Richards (1983), other major determinants that cut cross between countries include per capita income, the rate of female labor force participation, percent rural, the infant mortality rate, and per capita energy consumption. These determinants have been applied in explaining different data sets in empirical studies.

The Malthusian model argues that death rates fall, and fertility rates rise when per capita income goes beyond the breakeven point or surpasses the equilibrium. Considering several of the oil-producing countries, we induce population growth by assessing the impacts of oil abundance on the number of deaths, net migration, and births. The recent decline in the fertility rates in the U.S might just a response to the increasing unemployment rates or just a signal of a long run drop in the lifetime of fertility. In general, recessions affect the fertility timings but not the amount of children that women will bear in their lifetime. Major trends in fertility get influenced by wider societal aspects that include trends in the employment, marriage patterns, economic development, women’s level of education, employment, cultural norms, and accessibility of contraception. The fertility rate in the U.S has gone towards that of Europe, where quite a big of countries struggles with the problems of low birth rate and even potential shortages of labor.

A paper by Stokes, Hunter, and Warland (1982) focuses specifically on the issue of oil and fertility. The paper indicated that oil-exporting status as measured using a dummy variable seemed to raise the birth rate of the country when using a single measure of fertility. They realized the relationship in two dimensions; at first they realized a positive correlation between birth rate and dummy variable used for oil-exporting status from a sample of most countries around the world. Their second dimension pointed out per capita GNP registered a positive effect on birth rate from a sample based on oil-exporting countries. To give light to their results, the paper proposed a rationale.

Firstly, they proposed that for a given country, the rapid rise in income required an accompaniment of more equitable distributed modern good and services otherwise impact on fertility will be negligible. Secondly, they contended that oil exporting countries formed a group of countries that faced a rapid rise in income. They argued this because many of the countries had achieved immense levels of income in a very short time attributing it to oil production and export. Thirdly, the paper indicated that high level of income did not bring about high social levels among the population as it only enriched a fraction of the population. Therefore, the paper concluded that lack of lowered fertility resulted in observations that the oil- producing and exporting status dummy variable was as a result of higher birth rates.

Haber and Menaldo (2011), explores the effects of oil, total resource production, and total fuel production. Further Lee (1997) explores the relationship between wage and fertility in pre- industrial economies and argues that economies changes in wage may not always confound with technological and institutional progress compared to developed countries. Cotet and Tsui (2009) explores whether the discoveries of oil affect the country’s population growth and health-related outcomes. They provide a comparison of changes in those outcomes with and without major discoveries of oil in the 1960s. Of much interest, their results indicated that countries with oil extractions experienced lower child mortality and increased population. The consequences of sudden changes in the international oil prices on the national income vary across the globe considering whether a country is a net exporter or importer of the oil. Constructed oil price instruments have positive effects on the real GDP of the country per capita growth. According to Brueckner (2012) the estimated first level impacts gives high statistical level of significance and the response impulse analysis shows that the examined oil price variation have lasting effects on the level of per capita GDP.

Four major limitations have been addressed in the (Hunter et al., 1982).The paper argues that new cross-country statistics for oil and other variables given that it dated back to 1982. Large and better sets of data allow for much robust study. Secondly, the paper used a little group of regressors to predict fertility; a measure of Quality of Life, per Capita GNP and Oil-Exporting status. Additional control variables and also instrumentation could have benefited the regressions. Most of countries that produce and export oil came from the Middle East and Muslims dominate this region hence they failed to control for geography and religion

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