How to help Haiti

I have plotted remittances and aid for Haiti, as a share of GDP (the aid data is from the World Bank, and slightly different than the OECD data used in a previous post.)

In 2008 remittances were 18.7% of Haiti's GDP. In comparison foreign aid before the catastrophe was 10.4% of GDP. Agriculture is 28% of Haiti's GDP. These 3 sources of income are a combined 57% of Haiti's GDP.

They have one thing in common: they have a low (but not zero) marginal product of labor. Having more people will not make these sources of income go up proportionally.

Why would remittances not be affected by the number of people? The reason is that other countries limit Haitian immigration. According to Gallop about half of Haiti's population would emigrate if it could, one of the highest in the world. They have not emigrated because other countries limit how many Haitians they want to absorb.

Foreign aid is somewhat responsive to population, but far from proportional. Small poor countries tend to get more aid per capita.

More workers in agriculture certainly have some value, but again given how many people there are already in agriculture (two thirds of the labor force) more workers will not add much value. The scarce land limits the value of more labor.

Haiti's per capita GDP would be 43% higher if today's aid and remittances were shared on their 1960 population instead of their current population (assuming it aid and remittances were same, but ignoring agriculture).

The idea of population control has been discredited in rich countries. The reason is that with our institutions, wealth is produced by labor. More mouths also mean more hands, so per capita income is generally not related to population size. Since more people produce more ideas, growth may even increase with population size for rich countries.

Furthermore, people like Paul Ehrlich helped damaged the reputation of population control through alarmist predictions that did not pan out (because for the world as a whole they were not true). But as is common in intellectual debates there has been an overreaction, with many economists now dismissing population entirely as a problem.

While Ehrlich was wrong in general, population growth harms the standard of living in some specific cases, namely countries where a large share of income is derived from fixed assets (in Haiti's case land, relatives abroad and the generosity of foreign nations). The most obvious case where more people reduces the average standard of living is Saudi Arabia.

Economists should be more flexible in their analysis of countries problems. Population control in not an issue in nations where there are good enough institutions to have a manufacturing sector, but a huge problem where fixed assets are an important source of wealth, such as Haiti.