The Impact of Population Growth on Economic Growth: Evidence from Ethiopia using ARDL Approach

Kidane Alemu

doi:10.7176/jesd/11-3-02

Abstract

There is no consensus on the impact of population on economic growth as economists are torn with different varying theories and empirical findings.This study therefore analyzed the impact of population growth on economic growth in Ethiopia using annual time series data over the period 1980/81-2018/19 in a multivariate framework. The study is theoretically based on neo-classical growth model and empirically on the ARDL Methodology along with Philips Peron Unit root tests and other important time series techniques. Results from ARDL Bounds testing indicated that there exists co-integration among population, export, import, trade openness, government expenditure and economic growth for real GDP is taken as dependent variable. The empirical model revealed population growth, export growth and import growth having significant positive impact on economic growth of Ethiopia both in the short-run and long-run while trade openness has significant negative effect on same and government expenditure growth has insignificant impact. Moreover, Toda-Yamamoto and Dolado-Lutkepohi as well as Innovative Accounting Techniques (that is, IRFs and FEVD) approaches to Granger causality analysis showed the existence of strong bidirectional causality between population growth and economic growth. The implication of the finding is that population is an asset rather than a burden for the country, and therefore; a carefully planned and productive population advance along with well managed macro variables would sustain the growth of the its economy. Keywords: ARDL, Causality, Economic Growth, Ethiopia, Population Growth DOI: 10.7176/JESD/11-3-02 Publication date: February 29 th 2020

Highlights

Population growth can have several effects on the economic expansion and performance of a country
Where:RGDPt is the real GDP at time t,PoPt is the total number of Ethiopian population at time t,Gt is government expenditure at time t,Xt is export in the Economy at time t,Mt is import at time t,OPnt is trade openness at time t ;and β0 is the intercept term of the model which depicts the level of economic growth that would exist with zero levels of the repressors
It study indentified the direction of dynamic causality between population growth and economic growth using TYDL approach

Summary

Introduction

Population growth can have several effects on the economic expansion and performance of a country. The world has witnessed unprecedented population growth during the last 50 to 60 years, faster growth than any other 50 to 60-year period, the rate of growth has been decelerating since its peak rate of 2.3 percent yearly in 1960 to 1.3 percent in 2005 to an expected 0.8 percent in 2025 and 0.4 percent in 2050 This shows reduction in the growth rate of population resulted from factors such as: urbanization, greater economic aspirations, increased female education and labor force participation, and more accessibility to family planning (Martin, 2009). The total population of Africa is about 1.2 billion people, which will double it after 29 years and it is being estimated at about 2.4 billion in 2050 This might hinder the achievement of planned family which is very significant to moderate population growth in the continent (Todaro, 2004)

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