The Population Growth - Economic Growth Nexus: New Evidence from Ghana

Abstract

Establishing the relationship between population growth and economic growth has become fundamental to the policy makers in developing countries and Ghana in particular. However, there has been no agreement whether population growth is beneficial or detrimental to economic growth. This study therefore examines the empirical relationship between population growth and economic growth in Ghana using time series data from 1980-2013. It specifically explores the short-run and long-run relationship between population growth and economic growth as well as the direction of causality between them. The study employed the Autoregressive Distributed Lag Bounds (ARDL) approach of estimation strategy due to its small sample property and its applicability of whether a series is integrated of I(O) or I(1). Granger –causality test was also employed to determine the direction of causality between population growth and economic growth. The study reveals a negative relationship between population growth and economic growth in the short-run and unidirectional causality in the long-run between them. The study further revealed that population density and labour force impacts positively, whereas unemployment rate impacts negatively on economic growth in the long run but gross capital formation was not statistically significant. Unemployment rate was statistically insignificant in the short-run. Gross capital formation, labour force and population density had a positive statistically significant effect on economic growth in the short-run but unemployment rate was not statistically significant. The ecm (-1) results reveals a high speed of 83.6 percent of long-run equilibrium adjustment every year after a long-run shock in the model. The study recommends that Government should continue encouraging its campaign on family planning and policies that would give rise to creation of job opportunities for the massive labour force that it has. The government should also put measures to ensure that the economy grows at a higher rate than the population growth. This will ensure that the increasing demand of services arising from the population growth is met.