The Long Run Relationship Between Population Growth and Economic Growth: Empirical Evidence From Bangladesh

This paper investigates the causal relationship between GDP per capita and population growth in Bangladesh. Using the Johansen co-integration test, it found evidence of a long-run relationship between population growth and GDP per capita. Next with a Vector Error Correction Model (VEC), the author found a causal direction between the two, which suggests that in Bangladesh population growth actually negatively affects GDP per capita, but not vice versa. Therefore, to some extent, Bangladesh is in the Modern Growth regime stage. Hence, the policy implication is very clear: appropriate measures should be taken in order to arrest population growth. The present analysis shows that there is a uni-directional negative causality from population growth to GDP per capita in the long run, which also means Bangladesh is now in the stage of a Modern Growth regime but is yet to attain the influence of GDP on population. In general, the population increases the youth dependency ratio, which in turn lowers GDP per capita. Furthermore, the additional labour is not being used efficiently, and economies of scale have not yet been attained: this is worsening the economic condition with the growing population.

Author: Zahan, Iffat
Type: Working Paper
Year: 2016