This leaves less for saving and investing in growth-enhancing activities. Can economic history settle the debate between demographers and economists?
Government officials that focus on growth may find that they suffer the consequences of poor planning. Forget moral restraint, was Malthus wrong?
Instead of focusing on adding to the population, cities like Huntsville have made an effort to attract large corporations and improve services to residents. Effect of Population on Resources Population growth was a concern as far back aswhen English economist Thomas Malthus predicted that it would eventually reduce overall living standards.
This view arguably contributed to a major fall in international funding for family planning programs, beginning in the s [viii]. We will tackle this question in our next post, which examines the unique economic history of the 20th century, and how this might help explain why economists seem to keep changing their mind—and why demography is more important than ever in a post global economy.
Williamson, World Bank Econ. Additional people provide a workforce necessary to generate goods and services. The theory was simple: Share this blog post This post is the first in a two part series exploring the relationship between population growth and economic development — a relationship that appears to have changed over time.
But at the same time, there are many areas of the world that lack access to basic resources like clean drinking water, yet continue to attract a growing population. As valuable as an increasing population can be to businesses and local residents, it can also bring problems like heavy traffic and limited resources, driving housing costs up and creating a higher demand for local services than can be supported.
But is this growth always a good thing? Second, new research suggested that there was in fact a negative association between population growth and economic performance. One example of the impact of population on economic growth can be seen in Detroit, where the local infrastructure suffered dramatically as people moved away.
Nevertheless, his essential insight that population growth constitutes a potential threat to economic development remained influential and informed international development policy agendas, especially in the s and s—a period marked by unprecedentedly rapid rates of population growth in many developing countries.
It also reduces spending on enhancing the economic potential of each child e. The second key discovery in the s was the emergence of a negative correlation between population growth and economic growth in further analyses of international cross-sectional data [xi][xii].
In the s researchers made two discoveries that questioned the neutrality of population growth with respect to economic development. First, analyses of the remarkable economic trajectory of East Asian countries in the late 20th century suggested a sizeable fraction of their impressive economic growth was attributable to high levels of savings and investment facilitated by earlier fertility declines [ix][x].
How family sizes affect investment At that time, the general view of economists was that high birth rates and rapid population growth in poor countries would divert scarce capital away from savings and investment, thereby placing a drag on economic development.
A recent meta-analysis of this research concluded that a negative relationship emerged in the post data, and that its strength has increased with time [xiv].
This finding prompted a subsequent reconsideration of the potential importance of reducing fertility in pursuit of growth. In the aggregate, these household level consequences of high birth rates were believed to exert a significant negative effect on per capita income growth [i][ii][iii].
What explains the discrepancy between the early research, which found little evidence of a relationship between population growth and economic growth in cross-sectional data, and more recent work which finds a negative and significant one?
The city filed for bankruptcy in and used the freedom from debt to reinvest in the local economy. Oxford University Press, Oxford, But on a more general scale, population growth can strain economies unless there are enough people and resources to support it.
In the s numerous empirical studies, utilising the growing volume of comparable international data, failed to detect a robust relationship between national population growth rates and per capita income growth [iv][v].The existing state of knowledge does not warrant any clear-cut generalization as to the effect of population growth on economic development in today's less developed areas.
Population and Economic Development. In developing areas of the world, population growth can seem to have a positive effect on local economies.
But is this growth always a good thing? Additional people provide a workforce necessary to generate goods and services. 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.
Originally Answered: How does population affect economic growth of any country? The population creates the economic activity by producing, consuming, and trading. People also come up with the discoveries and innovative ideas that multiply the effectiveness of labor and capital. 4) Effect on PCI, if the population growth does not match the labor force there is a negative effect on PCI.
5) Population Growth and Standard of Living, as increase in population leads to more consumption. Figure 1: Population growth and economic growth, Moreover, as Figure 1 illustrates, the simple cross-sectional relationship between population growth and economic growth is clearly negative when viewed over the long run (i.e.