The Relationship Between Population Growth and Economic Growth in Ethiopia

Kidane Alemu

doi:10.7176/jesd/11-15-07

Abstract

This paper examines the relationship between population growth and economic growth in Ethiopia using time series data from 1980/81-2018/19 and in a multivariate framework. Results from Philips Person unit root tests show that the time series under consideration contain I(1) variables implying that the model adopted(that is, ARDL methodology) is quite appropriate. Result from ARDL Bounds testing indicates that there exists long run relationship (co-integration) among the Ethiopian population growth and economic growth when real Gross Domestic Product (RGDP) is taken as dependent variable. The coefficient of the estimated error correction term is found to be -0.921244 and it is highly significant, further confirming the existence of long run relationship. It means that it takes only one year and about a month for the short run disequilibrium to adjust towards the long run equilibrium .The empirical model reveals that population growth has highly significant positive relationship with economic growth of Ethiopia both in the short-run and long run. Moreover, Toda-Yamamoto and Dolado-Lutkepohi as well as Innovative Accounting Techniques (that is, IRFs and FEVD) approach to Granger causality analysis show that there exists bidirectional causality between population growth and economic growth and also both are witnessed to be strong as of impulse response and variance decomposition results. The implications of the findings are that population is an asset rather than a burden for Ethiopia, and therefore a carefully planned population expansion along with well stable macro-economy, better employment opportunities and expanded quality education given equality and justice in social, political and economic spheres would drive the economic growth and development in the country. Keywords: ARDL, Economic growth, Ethiopia, Population Growth DOI: 10.7176/JESD/11-15-07 Publication date: August 31 st 2020

Highlights

Population growth can have several effects on the economic expansion and performance of a country
The study used annual time series data comprising observations over the period of 1980/81- 2018/19.The data were obtained from Ministry of Finance and Economic Development (MoFED) and Central Statistical Authority of Ethiopia (CSA).in order to avoid data inconsistency problem; attempt has been made to stick on the same source, that is, the data obtained from Ministry of Finance and Economic Development (MoFED) are mainly relied in the study
The study examined the impact population growth on economic growth in Ethiopia for the period 1980/81-2016/18 using a recent and popular methodology of Autoregressive Distributed Lag (ARDL) Bounds Testing.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. Population growth and economic growth are highly interrelated since they affect each other. Their relation has attracted the attention of economists since economics was established as self-discipline. When people started to cultivate the land to produce food through agriculture some 1200 years ago, the estimated world population was not more than 5 million. From year 1 on our calendar to the begging of the industrial revolution around 1750, world population tripled to 728 million people which are less than three quarter of total number living in India today. During the years 1750-1950, 1.7 billion additional people were added to the planet's population number. The world welcomed the twenty first century with over 6 billion people .And assuming that it will continue to grow with such trends, it is projected that the total world population to be reaching to 9.7 billion in 2050 and 11 billion 2200(Todaro,2003)

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Results

Conclusion