Growth, population, and knowledge diffusion

Abstract

This paper reviews the recent development of growth theory, focusing on the consistency between theory and evidence in terms of effects of population on growth, and presents some policy implications. Although positive effects of the population size on growth are likely to exist, the size does not necessarily mean the size of the domestic population. In the world with substantial but costly international knowledge diffusion, what affects growth is the population size of the technological leader country, the United States, from which knowledge spills over, and it is the world population when diffusion is costless. Therefore, policies to promote population growth may not be growth-enhancing for most advanced countries. A more effective population-related policy objective theoretically suggested is to encourage international knowledge diffusion.