The Relationship Between Population Growth and Economic Growth in Ethiopia

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