Many different economists have studied the correlation (or lack thereof) between population and economic growth. With various tests that were designed to highlight (if any) clear associations between population and economic growth, these economists have been unable to uncover such clear correlations over any long periods of time. While only “nonsignificant” correlations were discovered in the 1960s and 1970s, in recent tests economists have found a negative impact of population growth on economic development in “cross-country” data from the 1980s. Of course, it is inappropriate to make generalizations about these correlations simply based on these few tests. Allen C. Kelley and Robert M. Schmidt, in “Aggregate Population and Economic Growth Correlations: The Role of the Components of Demographic Change” (1995), summarize previous findings regarding these supposed correlations, as they also introduce their own complex theoretical and empirical models for population and economic growth.
There are five general points that summarize the major trends in the results of previous population/economic growth tests. One, in the 1960s and 1970s there was not a statistically significant impact of population growth on per-capita economic growth. Two, in the 1980s the correlation between population growth and economic growth was negative. Three, this correlation varies according to the level of economic development; namely, it is positive in DCs and negative in LDCs. Four, population density was the only demographic factor that demonstrated any statistically significant effect on economic growth during the 1960s and 1970s. Five, all of the factors associated with demographic change had a statistically significant presence in the 1980s.
According to Kelley and Schmidt, these previous tests were quite general, and it is important to further break down these factors associated with population growth and economic development. For example, the authors attempt to determine whether these demographic trends are applicable to short-run models, or long-run models. By assessing demographic factors separately, it is easier to characterize certain relationships between variables, and thus better determine the long-term, versus short-term trends and correlations.
There are three basic theoretical models associated with population and economic growth: convergence patterns, production function, and simple correlations studies. All three models have distinctive ways of organizing specific variables that contribute to population and economic growth. Kelley and Schmidt are particularly interested in a specific convergence-pattern, which incorporates the production function into the determination of different levels of economic development. They are interested in making their tests more specific (in terms of clearly defined variables), by more clearly isolating the different forces behind economic development and the population status. In their empirical tests, Kelley and Schmidt limited their data to three specific time periods (1960-1970, 1970-1980, and 1980-1990); they were able to compare and contrast the effects of individual demographic and economic variables on various demographic/economic trends during the periods. By breaking down the demographic variables, Kelley and Schmidt were able to better understand how specific variables changed in regards to the population and economic trends during the different decades. Although their results were consistent with those of previous tests, they were able to explore more the reasons for such changes over time.
What do we get out of this paper? While throughout the 1960s and 1970s there did not seem to be a statistically significant correlation between population and economic growth, in the 1980s a negative correlation between population growth and economic growth (per capita) emerged. Kelley and Schmidt constructed a much more specific model which isolated various economic and demographic variables. While it is impossible to determine whether these trends are long-term or short-term instances, it is fair to say that the consequences of demographic change are ambiguous. And they change over time, according to the most recent tests. Perhaps in time, economists will able to determine the differences between short-term and long-term variables and trends.
“Aggregate Population and Economic Growth Correlations: The Role of the Components of Demographic Change,” by Allen C. Kelley and Robert M. Schmidt in Demography, Vol. 2, No. 4, November 1995, pp. 543-555.