How did we get here? In the case of natural resources, it is expected that technological innovations will be directed toward creating substitutes as the resources become scarce and their prices rise. The aging population in countries like Japan means that a relatively smaller cohort of working age people will be called upon to support growing numbers of retirees slowing economic growth unless there is a substantial rise in productivity and per capita output. The relationship between education and population has attracted the attention of both scholars and policymakers, especially since the mid-1970s. 3 (a) compares poverty index and average PCI. Department of International Economic and Social Affairs. Baby booms are characterized by relatively short periods of increased fertility which can lead to greater population growth. (, Thakur, A. K., Kassam, A., Stoop, W. A., Uphoff, N. (. Connor (2016) suggests that economic growth in these countries and the availability of short-term work visas have attracted large numbers of migrants with the number of foreign-born residents growing by 61% between 2005 and 2015. Slowing population growth in high-income countries not only means lower economic growth rates but also an increased burden on the working population to support the growing numbers of retirees. The 1990s were a particularly difficult period for Russia where population declines and low growth of per capita GDP combined to generate negative average annual economic growth. These results are undoubtedly influenced by the exceptional economic performance in China and other large emerging economies although economic growth also picked up in many low-income countries. He argues that when the rate of return to capital is greater than the economic growth rate (r > g in his notation), the likely result will be concentration in the ownership of capital leading to increasing inequality. One would expect this return to decline as greater amounts of capital are amassed which may account in part for Piketty’s estimate that current returns are lower than those of the 19th and early 20th century. This process appears to have run its course in Europe by the beginning of the 20th century and somewhat later in the western offshoots, while many countries in Africa, Asia, and Latin America have yet to complete it. Most of those who believe the world is overpopulated focus on the potential exhaustion of vital resources such as farmland, water, and raw materials.  |  U.S. and EU immigration pressures in the long run, The effect of population growth on economic growth: A meta-regression analysis of the macroeconomic literature, Built up by the oil boom, North Dakota now has an emptier feeling, Population and economic growth: A simultaneous equation perspective. Models of this nature are often referred to as “exogenous” growth models because the two variables that drive economic growth, savings (which lead to increases in the capital stock) and population (which determines the amount of labor available), are introduced exogenously. According to the Malthusian model, the causation goes in both directions. The results reported in Table 1 can shed light on the timing of the demographic transition in various parts of the world. In general, high-income countries include the members of the OECD (Europe, North America, Japan, Korea, Australia, New Zealand, Israel, and Chile) along with such countries as Kuwait, Saudi Arabia, Uruguay, and a number of smaller island economies. In low-income countries, rapid population growth is likely to be detrimental in the short and medium term because it leads to large numbers of dependent children. Piketty (2014) sometimes treats per capita economic growth and productivity growth as interchangeable. The danger of slow economic growth in Piketty’s view is that the resulting concentration of capital will help to bring back the patrimonial capitalism of the 19th century when one’s fortune was more effectively made by marrying an heir to great wealth than by working to develop one’s talents in the service of a productive career. Search across a wide variety of disciplines and sources: articles, theses, books, abstracts and court opinions. Other analysts find that immigration generally has positive effects on income growth and productivity with limited displacement of low-skilled workers (Boubtane, Coulibaly, & Rault, 2013; Mason 2014; Peri, 2012). Please read and accept the terms and conditions and check the box to generate a sharing link. (2005) point to falling labor forces as the baby boom generation retires and workers choose to work fewer hours coupled with lower per capita output growth as causes of slower GDP growth. These countries have annual per capita incomes of $12,476 and above according to World Bank data. There appears to be some agreement among economists not only that productivity growth has slowed since 2000 in high-income countries but also that there is little prospect for a reversal of this trend. Members of _ can log in with their society credentials below, This article is distributed under the terms of the Creative Commons Attribution 4.0 License (. Please check you selected the correct society from the list and entered the user name and password you use to log in to your society website. relationship between population and economic growth is not straightforward. Meeting this increased demand without causing irreversible damage to the environment may be challenging but the rapid adoption of more sustainable agricultural practices currently under way suggests that this is not an insurmountable task. The quantity, quality, structure, distribution, and movement of a population can help or hinder the rate of economic development. For the United States, the 2016 population growth is estimated at 0.8% made up of equal parts natural increase (crude birth rate of 12 per thousand and crude mortality rate of 8 per thousand) and net migration (4 per thousand). Population growth affects many phenomena such as the age structure of a country’s population, international migration, economic inequality, and the size of a country’s work force. It is ironic that an economy can stall in the short run due to population growth and also population decline. An interesting result from early efforts to model endogenous growth is that these models often suggest that there is a positive relationship between population growth and per capita economic growth in contrast to the predictions of the neoclassical growth models. Average annual growth of per capita GDP also increased during the period 1913 to 2010 which, when combined with generally higher population growth rates, led to significant overall economic growth, over 3% per year for the world as a whole. Population Division, et al. In high-income countries, population growth is low and in some cases negative giving rise to age structures with a high proportion of elderly people in the population. Recent technological innovations in food and agricultural production offer an encouraging example. The purpose for a market economy is to find ways to encourage growth that both improves from the birth of babies and withstands fluctuations in overall population. Many felt that both population growth and economic growth needed to be scaled back or eliminated entirely to avoid an existential crisis. According to Coale and Hoover's pioneering study (1958), a high rate of population growth is not supported by a corresponding increase in investment that maintains per capita income intact. A theoretical model is developed relating welfare to income and range of choice, and empirically testable implications are derived. Average annual compound growth rates are calculated using the formula: V = Aert where V is the final value, A the initial value, r the rate of growth, t the number of years, and e is the exponential. This site needs JavaScript to work properly. NIH Eventually, birth rates begin to decline resulting in a return to lower population growth as the transition is completed. Population growth could be beneficial or detrimental to economic growth and economic growth could have an impact on population growth. A different type of dependency problem exists in many African countries where relatively small working-age populations are required to support the very large number of children who have important educational and health needs. World population in 1820 was just over a billion people compared with about 6.9 billion in 2010 (World Economics, 2016 and World Bank, 2017). In most cases, however, the population growth rate appears to be taken as a measure of labor force growth although more sophisticated models also take account of labor quality and the structure of the labor force. In 2012, about 15 million people emigrated from low- and moderate-income countries while high-income countries received about an equal number. FundingThe author(s) received no financial support for the research, authorship, and/or publication of this article. In line with some of the arguments sketched earlier, higher population growth may be beneficial in high-income countries where there is currently a tendency for population growth rates to decline. HHS . Population is very closely linked to the economic development of a society. View or download all content the institution has subscribed to. National income has a direct effect on the development of health systems, through insurance coverage and public spending, for instance. In analyzing human behavior that determines the type and amount of quality that is acquired over time, the key to the analysis is the relation between the returns from additional quality and the costs of acquiring it. Hanson and McIntosh (2016) argue that there will be little change in the impact of emigration from Africa, predicting that it will siphon off only a small proportion of the estimated population increase between 2010 and 2050. In the longer run, there is likely to be a demographic dividend in these countries as these young people become productive adults. Angus Maddison compiled an extraordinary set of data on population, per capita GDP, and GDP for virtually all countries in the world from 1 to 2008 of the Common Era (World Economics, 2016 and Maddison, 2001). Population growth slowed slightly between these two periods in all regions except Sub-Saharan Africa where negative growth in per capita GDP during the 1990s shifted to a much higher rate of 2.29% for the period 2000 to 2015 and an overall economic growth rate for this period of almost 5%. Shackleton (2013) estimates that average annual growth in U.S. MFP over the period 1870 to 2010 was between 1.6% and 1.8% which is about the same as average annual growth of per capita GDP over that period (1.8%) based on the Maddison Project (2013) data. High population growth rates mean that the average age of a population will be young and there will be high dependency rates. The precise make-up of geographic regions and other country classifications used by the World Bank can be found at https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups. Early empirical applications of the neoclassical growth model found that after accounting for the effects of labor and capital in economic growth, there remained a large residual thought to be associated with technological progress (Shackleton, 2013). World economic growth over this period at 3.79% was higher than the average rates for the past 200 years (2.25%) or for the period 1913 to 2010 (3.05%). He notes that much progress has been made in freeing up the movement of goods, services, and capital but the international movement of labor remains restricted. It would still be true that, as noted by Piketty (2014), only the growth in per capita GDP would give rise to improvements in economic well-being. The relationship between population growth and economic growth is of great interest both for demographers and for development economists. Simply select your manager software from the list below and click on download. The U.S. Census Bureau (2017) predicts that annual natural population growth in high-income countries will be −0.3% by 2050. SAGE Publications Inc, unless otherwise noted. Piketty’s explanation of the importance of economic growth is not the only possible account, of course. The arrival of large numbers of immigrants can upset traditional social systems leading to cultural conflict as well as economic anxieties. In fact, population growth in the United Kingdom between 1820 and 2010 was moderately higher at 0.57% than was the case for the previous 820 years while annual growth in per capita GDP was substantially more rapid at 1.28% after 1820 (World Economics, 2016 and The Maddison Project, 2013). Table 4. Real Average Annual Per Capita GDP Growth and Correlation Coefficients Between Real Per Capita GDP Growth and Multifactor Productivity Growth, Selected OECD Members, 1990-2015. If you have access to a journal via a society or association membership, please browse to your society journal, select an article to view, and follow the instructions in this box. Average Annual Growth Rates of Population, Per Capita GDP, and GDP, World Regions, 1820 to 1913, 1913 to 2010, and 1820-2010. To the extent that greater freedom and capabilities improve economic performance, human development will have an important effect on growth. Trajectories of population growth do not tend to include large and dramatic turning points so it is unlikely that the population trends in various parts of the world can be significantly altered in the short run by policy changes. Note that a constant annual population growth rate of 1% means that population doubles every 69.3 years. As in the case of in­equality, this relationship between poverty and economic growth in the early stage of development can be confirmed by cross-section data and not time-series data. My approach to population quality is to treat quality as a scarce resource, which implies that it has an economic value and that its acquisition entails a cost. The relationship between economic growth and the rate of return to capital is of central importance in his analysis. This paper examines regional population growth and welfare levels in relation to the following variables: population size of the region; spatial location; and access. There are still many who take exception to conclusions such as these, arguing that the world is currently overpopulated putting unsustainable strains on resources and the environment. These factors both affect and are affected by overall economic growth. Term Paper on Relationship Between Population Growth and Economic Development Assignment The world has gradually and consistently become more of a 'have / have not' scenario as new welfare states emerge in the midst of new emerging economies, new technological expansion opportunities and all new approaches to economic distribution. In the following sections of the article, the relationships between population and economic growth are analyzed to assess the implications of their likely evolution for growing inequality around the world and for population and migration policies. Average Annual Growth of Population, Real Per Capita GDP, and Real GDP (Percent), Selected Countries, 1820 to 1913 and 1913 to 2010. Table 5. This can be attained by increasing the standards of living of the people – especially by increasing the consumption level of food, healthcare, education etc; institute political, social and economic sectors that advance the values for human dignity thereby boosting the peoples’ sense of worth and raising the opportunities enjoyed by the people by way of increasing the var… The Maddison data include one group, the “western offshoots” (United States, Canada, Australia, and New Zealand) not found in the World Bank data. The Relationship Between Economic Growth and Population Growth If population growth and per capita GDP growth are completely independent, higher population growth rates would clearly lead to higher economic growth rates. In these models, rapid population growth leads to smaller amounts of capital per worker slowing economic growth (Bucci, 2015). Population growth is falling in many parts of the world and once the demographic transition is completed in sub-Saharan Africa and other areas of robust population growth, world population growth will probably return to historic levels of less than 1% per year. The implication of Malthus’s model is that average incomes will always be driven down by population growth to a level that is just adequate for the population’s subsistence. Data on productivity are from the U.S. Bureau of Labor Statistics (2016) and the Organization for Economic Cooperation and Development (OECD; 2016, 2017). If this is correct, the problem posed by Piketty’s inequality may be at least partially self-correcting. Find out about Lean Library here, If you have access to journal via a society or associations, read the instructions below. On the other hand, for an underdeveloped country with high population density and a high percentage of employable people, any increase in population will be detrimental to its economy. The e-mail addresses that you supply to use this service will not be used for any other purpose without your consent. (2005) agree noting that slowing population growth in the United States is part of the reason that future U.S. economic growth will be lower than it was for most of the 20th century. In addition to the potential effects of population growth on economic inequality, population and economic growth have significant impacts on such controversial topics as international migration and global resource use. Although population continued to decline in Russia after 2000, per capita output rebounded significantly leading to overall annual average economic growth of 3.53%. The population in one way constitutes a source of labor that could be utilized to boost the country’s production. As dependents, the large number of children in sub-Saharan Africa will slow growth but once they enter the labor force, these countries can expect to reap a “demographic dividend” that will enhance economic growth. Similar benefits to both receiving and sending nations would become available if there were fewer barriers to the global movement of labor resources. The economic effects of the baby boom, International Journal of Finance & Economics. As population growth rates have begun to fall in recent years, the possibility that food and natural resources will be exhausted by a larger population seems to be less of a preoccupation than the more likely danger that continued use of the earth’s resources at current rates will lead to climate change and other environmental problems. Empirical work on the effects of population growth on economic growth in particular countries has generated contradictory results. With the Industrial Revolution, however, both income and population growth began to increase as did the supplies of food. Man is a producer as well as a consumer, and in order to balance the rate of production and the rate of consumption, a certain poulation level must be maintained. Table 7. Piketty (2014) estimates the “pure” rate of return to capital, defined as the observed rate of return minus an estimate of the costs of managing investment portfolios, to have been 4% to 5% in the 19th century declining to 3% to 4% today with substantial variation from country to country. His teaching and research interests include international trade, public policy, economic development, and ethics. All other countries are considered to be low- and middle-income countries. Effect of Population on Economic development: Increases in population in a developing country like India definite prove to be a deterrent factor on its economic development. 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