Demographic Change and Economic Growth: A Policy Perspective

Abstract

Many advanced countries are facing the problem of ageing population while many low-income countries still believe that controlling population may positively affect their economic growth. In this regard, this paper attempts to analyse effects of demographic factors on economic growth. A sample of top ten most populated countries in the world has been considered and panel 2GLS estimation technique has been applied to probe the effects of number of demographic and nondemographic variables on per capita GDP growth. The results reveal that per capita GDP growth rate is inversely associated with growth rate of population but is directly depended on life-expectancy, dependency ratio, gross domestic savings and labour force participation rate. The major finding is that although higher Population Growth Rate (PGR) may reduce per capita GDP growth rate initially but policies to strictly control the population growth may cause shortage of working age population (WAP) in short run and ageing society in long run. Therefore, rather pursuing the past policies of developed countries regarding control over PGR that have recently been reversed as well, Pakistan needs to develop human capital and labour productivity in rapidly ageing world.