Macroeconomics: Population Growth Rate Essay

Submitted By seho
Words: 1762
Pages: 8

Introduction
The population growth rate makes an impact on both the consumption and the productivity of a country’s economy (Brucker & Schwandt, 2013). It is still arguable whether high population growth is an advantage or a nuisance to economic growth as an additional individual can contribute one pair of hands for labour but it is also an extra mouth for consumption. Thus, it is important to deliberate the effects of population growth on economic growth (with real gross domestic product (GDP) per capita) in developing countries.
Positively, there is a relationship between the population growth and economic growth. The Solow model declares that an increase in the population growth rate can reduce the capital per worker as well as the sturdy state output per worker (Mishkin, 2012). If the growth of the population in a country upsurges over time, the economy will have a larger number of workers with the same volume of capital where each worker has now less capital to work with. This results to a reduction in output per worker.
The Solow growth model
The hypothesis that states countries showed a substantial decline in population growth are now richer than countries where population growth is still high. This statement is supported by Mishkin (2012) that the Solow model indicates that the greater population growth depresses the level of output per person in a sturdy state. The Solow growth model explains that the population growth determines the capital accumulation, which also determines the economic growth.
Population growth in the Solow growth model
Let n = growth in the labour force. When the rate of population growth increases from n0 to n1, it encourages the economic growth and the capital stock will grow at a lower rate than the population. In other words, an increase in number of workers while the capital stock remains constant results in capital dilution, the growth in the labour force leads to less capital per worker. Since the country has to feed its people, not enough will be saved and invested to keep capital per person ratio at its original level (k0). Population growth distresses the capital accumulation in the same way as depreciation . Therefore, the capital per person ratio decreases until a new steady state is reached. In other words, the investment requirement, that is, the (n0 + d)k line gets steeper as population growth increases. The (n1 + d)k line will now intersect the savings curve at a lower steady-state capital per person (k1). This implies a lower level of output per person (y1) and therefore, a lower living standard.
The table 1.1 below demonstrates some select twenty countries that are classified as developing countries where population growth is high from the beginning of 1960s and still is relatively high at the commencement of the present-day century.
Country
Real GDP per capita (2012 in USD)
Population growth rate
Population (in millions)

2003 (millions)
2012 (millions)
Average
(%)

Afghanistan
1234.67
23.12
29.11
2.33
29.80
Argentina
17554.12
37.68
40.76
0.79
41.28
Belize
6642.80
262.70
338.90
2.58
338.90
Brazil
10263.89
179.12
192.38
0.72
193.94
Cambodia
2149.93
12.71
14.61
1.40
14.86
China
7959.62
1284.53
1347.35
0.48
1360.72
India
3340.60
1056.00
1202.00
1.30
1233.00
Iraq
3659.32
25.24
31.76
2.32
32.58
Kenya
1517.33
33.00
42.03
2.45
43.18
Malaysia
14774.64
24.40
28.80
1.67
2.29
Mexico
12616.64
100.00
114.79
1.39
116.90
Myanmar
1324.61
49.30
52.40
0.61
52.8
Nepal
399.70
24.10
27.16
1.20
27.47
Nigeria
2293.54
131.06
164.39
2.29
166.21
Pakistan
2491.27
144.90
176.74
2.01
178.91
Peru
9428.86
26.74
29.79
1.09
30.31
South Africa
10959.74
25.25
50.59
7.20
52.98
Sri Lanka
5384.26
18.92
20.87
0.99
20.33
Thailand
8454.94
63.80
66.58
0.43
66.79
Uganda
1165.01
25.94
35.15
3.09
36.35

Source (table, graph): IAWP, Trading Economics and Wikipedia
The graph A…