How Population Growth Influences Economic Development

A STUDY OF POPULATION GROWTH AND ECONOMIC PERFORMANCE

Population which is the number of people/group of individuals living in a geographical location with common characteristics has been a topic of discourse over the years. The influence of population growth on the economic development of nations across the world is the focus of this article.

The population growth of a country has been a blessing in time past to some economies and otherwise in some other countries. However, the major questions are at what rate of growth? At what stage of economic growth? At what population rate? At what skewed population level? would this be considered a blessing or otherwise?

There have been varying theoretical and empirical views on the impact of population on the economic growth of different economies with long-standing positions. Some researchers advocated for a negative relationship between population growth and economic performance while others proved otherwise.

The views of the proponents of the former could be viewed in relation to the extent of resources a country possesses (shortage/abundance) while the latter saw population growth as a blessing when the right measures have been put in place. However, most of the studies probably viewed their studies in isolation placing less consideration on other factors fueling or diminishing the projections of such economies and varying economic policies indirectly related to population.

Population Vs Economic Resources

The resources an economy possess is invariably a blessing to such an economy. However, this blessing is limited to the use in which these resources are being put, the extent of industrialization, and favorable international trade amongst other factors.

Over time, most developed countries such as the United States of America (USA) has been seen to maintain a high population rate with quite sustained economic growth. This could be attributable to the level of technology, effective policies and accountable administration, active and beneficial international participation, and appropriate direction of economic resources.

However, some countries have been blessed with mildly large populations and lots of natural resources with them still being kept at the cadre of a developing nation. A typical example of such an economy is Ethiopia. With a mild population and abundance of natural resources such as gold, copper, aluminum, natural gas, etc., the country could still be referred to as a developing nation.

This could be attributable to their level of international exposure and belief. Where an economy possesses little or fewer resources in connection with the increase in its population growth, there might be limitations in the level of economic development of such an economy. However, this could lead to creative measures in which these economies would divert their natural scarcity to artificial abundance.

These could bring about creativity and alternative measures which could serve as a complementary course in aiding the level and quality of their existence. An example of this such economies is Japan, South Korea, and Italy amongst others.

Dating back to 1700 in China, the estimated population was roughly 150 million which doubled over the next century and was capped at 450 million in 1850. Based on this, there was an increase in the geometric population state of the country as the population rate grew beyond bounds. This was attributed majorly to the increased and uncontrolled birth rate with a corresponding decrease in death rate at that time.

At an initial stage, the population rate outgrew the level of economic resources, bringing about famine, inadequate social amenities, infrastructural facilities, educational facilities, poor urban and regional planning, poor human capital development, and even natural disasters such as earthquakes. However, a sustained level of this situation brought about the emergence of revised economic policies.  

Some of these policies include the One Child Policy emanating from the 1980 policy, and the Two Child Policy which came into play in 2016 with some rewards intended to curb the growing birth rate of the Country. However, a country’s population comes with an increased consumption level. Where the consumption level does not commensurate with the output of the quality labor force (which makes up the production level), there is a disconnect leading to heavy pressure on the current resources of the economy.

Although it can be said that this type of economy would usually create a market for economic activities, especially imports and foreign direct investments. However, such a country could fast become a dumping ground for the market of other countries.

Having been opened to the possible doom a country could face where its population is not properly managed, different countries have come about different measures such as childbirth control measures, increased awareness, and education of citizens amongst others. Although population explosion is an undesirable state for any economy, a level of population rate is desired for the sustainability of any economy.

Determination of the Desired Population Rate of Economies

In every economy, a certain level of population growth is required. An increase in population growth could lead to increase consumption and hence sprout the output produced in an economy. A state where the required level of population is not available is called underpopulation and this state is as disastrous as an overpopulated state.

More attention has been directed towards overpopulation because it tends to be more tasking reducing a populated economy than increasing a less populated one. This could be attributed to the Malthusian theory of natural sex instincts in individuals and the arithmetical progression in the food supply.

Although preventive and positive checks were postulated as control measures/way forward in this regard, however, other expansive factors need to be considered in the course of achieving more intentional and effective policies.

It has been discovered that some countries possess bountiful natural resources and are in economic abundance with population figures bound to utilize the resources of such countries. However, these economies cannot be categorized as the most developed economies in the world.

This could be a result of the skewness of the resources of such a nation to a particular group of the population, the majority of the population being dependent i.e little labor force in relation to the country’s total population, insufficient learned labor force to utilize the resources of such economy and the extent of the increased rate of labor emigration from the country.

An example of such described country is Nigeria. Nigeria is the largest country in Africa and the 7th largest in the world blessed with abundant economic resources and still belongs to the category of developing nations.

Although some other countries may have inadequate population sizes with fewer resources and some others with large population sizes with fewer resources as earlier mentioned, however for the scope of this study, the focus would be on countries with abundant population and economic resources with low economic growth and development.

One of the traits exhibited and decisions made during the medieval age as regards population is primitiveness. Cultural and religious beliefs also took the lead as regards people’s reasoning without little or no consideration for what the effect of such beliefs would be.

Surprisingly, the primitive ways had a positive toll on economic activity especially as it relates to agriculture and manufacturing in the early periods. However, in the word of Malthus, “The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or another visit the human race“. This has been seen to materialize in one way or the other, even though preventive measures have been used to minimize the intensity of some of the expected doom.

Snippets of Different Opinions on Population & Economic Growth with Postulated Control Measures

Thomas Malthus: The Malthusian theory emphasized the factors that could help control the human population on earth and identified factors such as war, famine, and disease as positive checks based on his view that they increase mortality rates thus keeping the population in check.

He also categorized measures such as celibacy, and birth controls as a good way to reduce the fertility rate and categorized this as preventive checks. These checks were postulated because Malthus’s thoughts examined the rate at which the population increases in relation to the rate of food availability.

Personally, this could be examined from the perspective of the extent/rate to which human being feeds to the level of food supply activities embarked on, and the rate at which the population grows. However, this theory has been countered over the years with the emergence of technology which has assisted in food

Production and death rate has not increased at the level at which it was imagined due to the emergence of science. Although, this theory might not be adequate as a result of human evolution and different policies bridging this population prophesies gap, however, his study still remains a true guide and backbone for current and upcoming analysis and studies with respect to population.

Paul Enrich:

Enrich’s theory debunks Malthus’ food supply theory by replacing it with environmental factors. To him, environmental factors would sustain the health of the earth and of the human planet. He is more inclined towards the possible environmental pollution and degradation that could be caused by human existence.

He proposed that the human environment tends towards a complete collapse as a number of resource-advantaged individuals would use up and pollute a number of environmental resources such as water and air.

He advocated for a goal of zero population growth (ZPG), in which the number of people entering a population through birth or immigration is equal to the number of people leaving it via death or emigration, capping the growth rate to a desired and controllable rate.

Although this appears as a smooth measure, but he didn’t consider possible measures for regions with balanced/moderate populations and unfavorable economic growth. Others have also deemed his theory from the perspective of racism and think it could lead to relatively unfavorable international population prowess.

Demographic Transition Theory:

This theory explained the reason for the non-geometric increase in population as Malthus postulated. The theory explained this using 3 stages of social evolution with reference to the level of technological development.

The first stage explained a pre-industrial society with an increase in both birth and death rates. The increase in these rates is based on the increase in activities that increase both rates. The second stage explained the fair increase in birth rate and decrease in death rate in the face of developed industrial societies. This in turn would lead to an increase in population growth. The third stage explains the decrease in both rates in an industrial economy.

Cornucopian Theory:

This theory becomes more audacious as the pessimism related to increased birth rate or death rate is being tackled. The theory asserts that human ingenuity can resolve any environmental or social issues that develop.

Regardless of the above-stated theories, different economies evolve in different ways. While some economies battle overpopulation, some battle underpopulation while some battle nonproductivity of their population.

For some reason, the control measures enacted to cater to overpopulation have become a great measure of population doom for some countries due to the negative placement and long-term effect of those policies.

Optimum Views of Population Transitions

The improvement in this theory has been developed by various modern-day economists such as Edwin Cannan and Carr-Saunders who came up with the Optimum Theory of Population. As seen above, the point between underpopulation and overpopulation is referred to as an optimum population.

This classification is benchmarked against the output/income per head of the population. The optimum population is attained when the output per head is at its highest and it is accompanied by various economic factors which include volume and quality of labor force which determines economic efficiency, technology level, net migration of a country’s labor force, available resource in the economy and distribution of those economic resources, among others.

Although, it might be difficult to obtain the actual optimum population of a country, hence, the factors listed above should be considered in this regard.

In relation to recent times, there has been more socio, political and economic factors affecting the rate of population control. Having established that a level of population growth is needed for economic activities and such a population is more efficient when the aggregate output in the economy is not skewed towards some classes of the individual.

The level of inequality of the population should not be extreme such that the productive resource of the economy is directed towards such a group. Where this occurs, regardless of how favorable the population could have been, there would be artificial restrictions on the availability of such resources, leading to scarcity and a vague overpopulation.

Also, to attain optimum production levels, the current resources have to be put into efficient use, science and technology should assist in attaining optimality in terms of production and attainment of self-sufficiency, and consideration should be given to the sustainability of currently available resources.

Not only is food production sacrosanct, but the means by which this production occurs without an equivalent effect on the economy should also be considered. That is, the trade-off between the availability of food supply and the damage to the ecosystem and human health should be less corresponding. This is because this might not only increase the death rate but might also cause increased damage by wiping off a total generation.

According to Malthus, an arithmetic growth in food population is accompanied by a geometric increase in human population and this misalignment would lead to overpopulation posing different threat to human existence and economies at large. He further explained this with a diagrammatic representation.

See the source image

image1                                                                                                                           Fig 2

Further to the listing of the several factors affecting the population of a nation, the below econometrics analysis shows the relationship as previously explained:

P = f(Br, Dr, Nr, Tk, Nm, Gp, Sef)

Econometrically, this could be rewritten as:

P= a0+a1Br+a2Dr+a3Nr+a4Tk+a5Nm+a6Gp+a7Sef+µ

Where:

P= Population

Br= Birth rate

Dr= Death rate

Nr= Natural resources

Tk= Technology

Nm= Net migration

Gp= Government policies

Sef= Social-economic factors

µ = Stochastic error term

The above-listed factors determine the population pattern of a country with none being figured in isolation. The ease of doing business should also be considered to allow for the exportation of goods with comparable competitive advantage and importation of goods with a less competitive advantage.

Empirical analysis showing the relationship between population and economic growth in Nigeria

As earlier mentioned, an increase in population is expected to increase the productive activities of a country. The below graph shows the relationship between population growth, real GDP, and Nominal GDP.

image6

Data source: National Bureau of Statistics

The above graph shows the tri-relationship between population, real GDP, and Nominal GDP from 2006 to 2021. It can be established from the graph that as the population increases at an increasing rate, GDP both nominal and real also increase, although more at a decreasing rate.

This is because of the factors earlier listed. Succinctly, the relationship in this graph for the decade involved has displayed the theoretical analysis of Malthus and has further explained various variational factors previously considered.

Current Population Projections in Some Jurisdiction

According to the latest United Nations projections, the world population could grow to around 8.5 billion in 2030, 9.7 billion in 2050, and a peak of around 10.4 billion during the 2080s. The below image represents the annual growth rate of the world population.

image3

Source: Our World in Data based on HYDE, UN, and UN Population Division (2019 Revision)

Currently, the world’s population is about 8 billion and has been projected to increase by 6.25% in 2030 years’ time, 14.1% in 2050, and 30% increase in 2080.

World population projection by region

See the source image

Source: The Angus Maddison Project & UN World Population Prospects

As seen in the above diagram, India has been projected to be the most populated country by 2100, followed by China, leaving the United States in the third position. The two Asian countries top the chart with about 34.8% of 100% of the total projected population.

World population projection by Continent

See the source image

Source: HYDE (2016) & UN. WPP (2019)

Based on the above diagram, Asia has been projected to be the most populated continent by 2100, followed by Africa, leaving Europe at the third position. Oceania is projected to be the least closely followed by Latin America.

According to World Bank, Washington D.C, Calculations by World Economics, London, the Gini index measures the equality of a country’s distribution of income. It is measured using a score range between 0 and 100. According to World Economics, 0 represents perfect equality and 100 represents very high inequality levels.

Perfect equality means a country’s total income is shared equally among its residents, whereas perfect inequality means a country’s total income is owned by a single individual. Nigeria’s Gini coefficient in 2020 was capped at 35.1% which indicates less parity. In an ideal situation in which incomes are perfectly distributed, the coefficient is equal to zero.

Variation of Gini Coefficient Between Base Year and 2030

See the source image

Source: Research Gate

Based on the figure above, the upward departure of the line from the capped horizontal line depicts a higher Gini coefficient, hence a higher level of income disparity and vice versa. It has been projected that by 2030, Nigeria would take the 13th as the most income dispersed country in the world. Studies have shown that the lion’s share of the GDP always goes to the (highest 20%) which received over 50% of Nigerian GDP.

Hence, the pattern of income distribution is such that allows the lowest 20% and the next 20% groups to be worse off. Social-economic and educational literacy should be invested in to afford the bottom group the opportunity to secure a participatory space in the economy’s GDP.

Possible Recommendations and Measures (Key Takeaways)

Although the projected population growth could have a positive relationship with economic growth. However, governments across the world must have a policy implementation strategy in place to ensure that other factors that impact economic growth are also in place.

There is a need to ensure that the growing labor force is incorporated into the production cycle to enhance economic productivity.

A deliberate attempt is needed to ensure factors that are arithmetical in rate could be harnessed to ensure a proportionate stance with geometrical factors.

Further, countries should work towards bridging the inequality line as this measures the extent of distribution of resources in the economy.

A deliberate attempt towards parity should be made considering the Gini-coefficient rate per year.

Read next: what is inflation in economics?

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