Tuesday, March 25, 2014

Correlation of Economic Growth with Population Growth

It is trivial that population growth and economic growth are (strongly) correlated. We wanted to reconfirm this relationship with actual data and also analyze the more crucial question how population growth and per capita economic growth are related.

Results significantly depend on the choice of countries and reference period (for measuring economic growth and population growth).

We decided to use the data from the Credit Suisse's research Institute, namely the Credit Suisse Global Investment Returns Yearbook 2014 (actually panning a second post to verify Piketty´s r>g claims).

Credit Suisse data is for the period 1900-2013 and itself based on Maddison (which we had previously used). Obviously there is significant uncertainty with regard to concept of economic growth in the early part of the 20th century (Kuznets' initial calculation for the US were made in 1937).

The data for the 21 countries in the data set looks as follows:

And the followoing correlation matrix confirms:
- positive correlation between population growth and GDP growth (correlation coefficient of 0.65)
- negative correlation between population growth and GDP growth per capita (correlation coefficient of -0.45)

Usual caveat: correlation is not causation and if there is causation we don't which way the causation runs

Nevertheless, the results seem to explain why elites favor population growth while the population is more ambivalent.

1 comment:

  1. So population growth is not good for per capita incomes, not really rocket science.