This presentation is part of: C10-1 Econometric and Statistical Studies

Population Growth and Per Capita Income: A Panel Cointegration Analysis

Sadullah Çelik, Ph.D. and Serap Ünlü, B.A. Economics, Marmara University, Göztepe Campus, Kadıköy, İstanbul, 34722, Turkey

The issue of population and economic growth is about as old as economics literature. The argument is not only related to how population growth affects economic development but also how economic development precedes population growth. The noteworthy effects of demographic factors on economic development have been well documented in the last decades providing a major role for this factor in economic growth models. However, the empirical formulation grounds heavily on theoretical framework. Moreover, there is no set agreement on the relationship between population growth and per capita income. This paper examines the relationship between population growth and per capita income of a sample of five developing countries, namely China, Hungary, India, Mexico and Turkey, and also five developed countries namely, France, Germany, Sweden, U.K. and U.S. for the period of 1970-2004. The methodology includes recently advanced panel unit root tests and panel cointegration analysis.

Our preliminary empirical findings show support for the existence of a long-run relationship via cointegration when we match the developing and developed countries within each other. The results support a positive (negative) and statistically significant relationship between population growth and per capita income for developed (developing) countries. Population growth could be beneficial or detrimental to per capita income depending on whether a country is developed or still developing. Hence, developing countries can expect to make gains in income dramatically by limiting population growth and therefore family planning programs can be justified; in contrast to developed countries which can follow policy actions to increase population growth rates in order to increase income.