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Demographic Factors And Economic Growth


Economic growth of any country defines an increase in production capacity. It is obtained by comparing the productions of two financial years. Economic growth also signifies that there is an increase in the productivity of the labour force. Generally, economic growth is the increased per head production capacity of any country. This implies more goods and services are produced in the country (Boldeanu and Constantinescu, 2015). It results in increased sales, and in turn, a hike in profits is visible. The economic growth is not a result of single factor or efforts of one sector. A range of determinants contributes to the economic growth of a country.
Based on their contribution there are various determinants responsible for facilitating the economic growth of a region. Human resources, natural resources, technological advancements capital employed and socio-economic factors are a few examples of the direct factors affecting economic growth. On the other hand, the non-economic factors include political and administrative factors, socio-cultural factors and factors relating to geography and demography. It can be seen that demography plays a major role in determining the economic growth of any country. It is so because human capital is the main source of generating output for the country and they are the ones utilising the returns as well. This implies that population growth is one of the key determinants of economic growth. Also, life expectancy has a serious impact on the GDP of any country (Diep and Hoai, 2016). This is so because if people die early then, the workforce will keep reducing which will result in a gap in production and an increase in the dependent population. In this study, emphasis will be laid down on demographic factors like life expectancy, population growth, mortality rate, educational qualification, age dependency ratio, etc. Impact of the population on economic growth
Coale and Hoover (1958) found that there is a negative impact of rising population on the economic growth of India. The earning opportunities do not grow at an equal pace as the population. Thus, it results in a declining living standard. Contrasting to the results of Coale and Hoover (1958), Azomahou and Mishra (2008) concluded that there is a positive impact of rising young population on economic growth. The study was carried out on the population of 110 countries divided among different age groups. The research included OECD and non-OECD countries. Where the positive impact of population growth was clearly visible in OECD and


non-OECD countries. Some negative impact was evident in non-OECD countries. The study also highlighted the impacts of the ageing population that were more significant in OECD countries. In line with the study of Coale and Hoover (1958), Diep and Hoai (2016) studied the relationship between the demographic factors and economic growth in South East Asia. They found that there is a negative relationship between GDP and population growth. It implies that with a rise in the population the GDP would fall and vice-versa.

Barro and Lee (1994) found a positive impact of life expectancy on the per capita output across 110 countries. Further, Ashraf et al. (2008) concluded that there had been a rise of approx 15 % in the long-term as a result of rose in the life expectancy of people. Similarly relating to the studies of Barro and Lee (1994) and Ashraf et al. (2008), Diep and Hoai (2016) found that there is a positive relationship between GDP and life expectancy. This means that if life expectancy rises than the GDP would depict an upward trend. Contrasting the results De la Croix and Licandro (1999) suggested that low levels of life expectancy resulted in favourable economic growth. Supporting the study, Acemoglu and Johnson (2007) found that during the period of 1940-2000 there is a decrease in the economic growth with a subsequent rise in the life expectancy across different countries.

A study from Basu, Barik and Arokiasamy (2013) revealed that education has a positive effect on economic growth. Also, in the research, they found that the effect of initial GDP on economic growth is negative and has a significant impact. Whereas, a positive impact of investment on the GDP ratio was seen with significant impact. Another study by Bloom and Canning (2008) it was observed that population health casts a significant impact on economic growth. It means that they are positively related. A fall in the health of population consequently results in declining economic growth. For the analysis and showing the relationship between demographic factors and economic growth of the UK, regression is used. For analysing the regression, there is a requirement of the dependent and independent variable. The dependent variable is the one on which the impact has to be seen. On the other hand, the independent variables are responsible for having an impact on the dependent variable. In this study, Gross Domestic Product (GDP) is considered to be the proxy variable for economic growth. It is also the dependent variable. On the other hand, population growth, life expectancy, disposable income and education are considered to be proxy for the demographic factors affecting economic growth. They can also be called the independent variables affecting the economic growth of any country. The following model for regression would be evaluated for the study:

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  • Diep, V.M.A.and Hoai, N.T. (2016). Demographic factors and economic growth: the bi-directional causality in South East Asia. The ninth Vietnam Economists Annual Meeting.
  • Bloom, D.E. and Canning, D. (2008). Population Health and Economic Growth. The World Bank. 24.
  • Barro, J.R. and Lee, J.W. (1994). Sources of economic growth. Carnegie-Rochester Conference Series on Public Policy.40. pp.1-46
  • Boldeanu, F.T. and Constantinescu, L. (2015). The main determinants affecting economic growth. Economic Sciences. 8(57).

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