Establish the Causal Relationship with Emphasis on the Direction Between Population and Economic Growth (1981-2009)

Topics: Population growth, Population, Population ecology Pages: 8 (1892 words) Published: July 2, 2013
ECO 816
Establish the Causal Relationship with Emphasis on the direction between Population and Economic growth (1981-2009)




The debate between positive and negative sides of population growth is ongoing. Population growth enlarges labour force and, therefore, increases economic growth. A large population also provides a large domestic market for the economy. Moreover, population growth encourages competition, which induces technological advancements and innovations. Nevertheless, a large population growth is not only associated with food problem but also imposes constraints on the development of savings, foreign exchange and human resources. Generally, there is no consensus whether population growth is beneficial or detrimental to economic growth in developing economies. Moreover, empirical evidence on the matter for developing economies is relatively limited (Savas, 2008).

According to Population ‘revisionist’ economists, population growth acts as an indispensable constituent for stimulating economic development because a sizeable population provides the required consumer demand to generate favorable economies of scale in production, lower production costs, and provide a sufficient and low-cost labor supply to achieve higher output levels (Todaro 1995, p. 303). Johnson (1999) pointed out that a high rate of economic growth is associated with high population growth and low economic growth is associated with low population growth.

The issue of population and economic growth is as old as the discipline ofeconomics itself. The debate on the relationship between population andeconomic growth could be traced back to 1798 when Thomas Malthus published the book An Essay on the Principle of Population. Malthus claimed that there is a tendency for the population growth rate to surpass the production growth rate because population increases at a geometrical rate while production increases at an arithmetic rate. Thus, the unfettered population growth in a country could plunge it into acute poverty. However, the pessimist view has proven unfounded for developed economies in that they managed to achieve a high level of economic growth and thus, both population and the real gross domestic product (GDP)per capita were able to increase (Savas, 2008).Similarly, many of the empirical studies that claimedthat a rapid population growth impeded economicdevelopment could not be considered reliable. This isbecause the statistical correlation between populationexpansion and economic growth has not addressed thecausal relationship between the two (Repetto, 1985).

The nature, direction and pattern of the causal relationship between population growth and economic growth has been the subject of very old debate among economists, demographers, policy-makers and researchers which is an open issue in development economics. Even though the nexus between population development and economic development has received extensive attention in the earlier period, it seems a stylized reality that it is hard to obtain a robust effect of population on economic development today. Despite the fact that there are abundant research studies on the relationship between population and economic development, there is no universal consensus as to whether population expansion is beneficial or detrimental to economic growth.(SarbapriyaandIshita, 2012).


Population and Economic Growth

The debate on the relationship between population and economic growth could be traced back to Malthus. According to Malthus, population tends to grow geometrically, whereas food supplies grow only arithmetically. According to the Malthusian model, the causation goes in both directions. Higher economic growth increases population by stimulating earlier marriages and higher birth rates, and by cutting down mortality from malnutrition...

References: Malthus, T. R (1978).An Essay on the Principles of Population.
Repetto, R. (1985), “Why doesn’t Julian Simon believe his own research?”
Washington Post (November 2, 1985).
Sarbapriya, R and Ishita, A.R (2012). Is Population Growth beneficial or
detrimental for Economic Growth? An Indian Experience
Savas (2008). The Relationship between Population and Economic growth:
Empirical evidence from the Central Asian Economics
Todaro, M. P. (1995), Reflections on economic development: The
selected essays of Michael P
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