Different schools of thoughts in economics have analyzed the relationship between population growth and economic development. The debate on the relationship was pointed in Malthusian population trap (1798).
Population increases was bound to stop
Life-sustaining resources increases at arithmetic rate, would be insufficient to support
Population increases at geometric rate
Generally, there are two strands of views about the impact of population growth on economic development; one view is in favor of population growth while the other view opposing that population growth is real problem. Both views present arguments. The view opposing the population growth started with the Malthusian Theory: Population growth is deteriorating the economic development by hampering economic growth and considers it is a real problem. The followers of this view point argue based on population-poverty cycle theory. Population growth reduces capital-labor ratio and savings. It increases the dependency ratio, putting a strain on the health, education as well as food supply. (Amjad,A.2013)
Second view argues that population growth is desirable for economic development. It is the real power and strength of a country. High population growth stimulates consumer demand, high labor supply at cheap rate and more division of labor. According to this argument, though rapid population growth rates results in additional demand for clothing, food, shelter, social services like education and health and growing employment opportunities. More labor is available for the productive resources. Further the argument states that population growth is not a real problem the real problem is the distribution of resources, 80% of the world resources are exploited by the one-quarter of the developed (rich) world and the 20% remaining is used by about the three-quarter of the world population. (Amjad,A. 2013)
Pakistan is one of the developing countries facing the problem of the rapid population growth. The population of Pakistan increased from 91.64 million of 1984 to 182.1 million of 2014. Today, Pakistan is the 6th most populous country in the World. According to the World Population Data Sheet 2013, Pakistan with the population of 363 million in 2050 is expected to retain the same position. The annul population growth rate of Pakistan is 1.67% which is higher than average growth rate of South Asian countries, which is an alarming situation for Pakistan. The continuous increase in the population growth in Pakistan is due to the high fertility and decrease in mortality due to rapid development in the medical field. High Fertility rate harms the health of the mothers and children, increases the health risk of pregnancy and child mortality rates. Population growth negative consequences falls greatly on the poor as they are the ones who are made landless, suffer first from cuts in government provide health and education services. Inequality arises under such pressures putting a country to hold back from the road of development. (Todaro, M.11 ed2011 )
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Objective:
The main objective of this paper is to examine the effect of population growth on the economic development of Pakistan.
Problem Statement:
Population growth is a major drawback of Pakistan lagging behind in economic development or other factors affecting the cause?
Hypothesis:
Hº : There exists a negative relationship between population growth and economic development.
H1: There exists a positive relationship between population growth and economic development.
Methodology:
This research paper has adopted the model of Regression analysis. Equation for the model is:
Y= β_(° )+β_1PG+β_2UR+β_â( @3)I+µ
Where
Y= GDP Growth Dependent variable
PG=Population Growth
UR= Unemployment Rate
I=Investment (% GDP) Independent Variable
µ= Error Term
This paper has taken Gross Domestic Product (GDP) as a dependent variable in the model to explain the relationship between population growth and economic development. Gross Domestic Product depends on other factors as well; Independent Variable. In our model, population growth, unemployment Rate and Investment are the Independent Variables. Each one of these independent variables has different effect on Gross Domestic Product. There exists a positive relationship between Economic growth and Investment level. Meaning more employment generation programs will be taken out. Unemployment rate of a country affects the GDP in a direct or indirect way. The most of the effect of Unemployment rate is bear by the poor population in an economy because they are the ones who are made worse off and have fewer opportunities and no job means less survival rate. Population growth rate in some nations holds a negative relationship with Economic Development and positive in some other countries.
Literature Review:
Afzal, M (2009) In his article âPopulation Growth and Economics Development in Pakistanâ analyzed the relationship for the year 1951-2001, the OLS estimation result conclude that Population tend to have a negative relationship in the case of Pakistan and causing a major problem in the road of growth.
Mohammad Aurangzeb Majeed (2008), states that the growth of population reflects increase in the Life expectancy years. The reason of such growth is due to less adult death and lower rate of infantile morality. On the other end, as the per captia income in Urban society increases the race for higher standard of living increases more rapidly causing the gap to widen resulting the poor to have a huge family to support the living-hood.
Gill (1992) examined the relationship between the population growth and economic development for the economy of India. He concludes that up to some extent population growth is good but large population puts pressure on resources within the economy. Population growth and economic development has a negative relationship.
Shabbir Ahmad (2009), In Pakistan 83% depends upon the agricultural sector for their living and the increase in population results that the number of acres per person has diminished. Unemployment and underemployment increased in the country due to the limited productivity of the land. Birth control campaign and large scale industry should be developed to shorten the gap.
Shahzad e tal (2009) examined the relationship between economic growth for the Pakistan Economy and demographic variable for the time period 1972-2006. Reduction in total fertility and infant mortality rate will help economic growth to increase in the positive direction.
Coale J; Hoover EM (Princeton University Press, 1958. 389 p.) calculated the effects of population growth upon economic development in India. The paper explains the relationship with the age composition, growth rate, birth and death rates. Compares India with High-fertility areas differing in size, low income, general strategy of development.
Xiujian Peng, 2002 studied for six Asian countries the relationship between the division of labor and population growth productivity. He founded that the division of labor cannot explain population, productivity is explained by the division of labor, determined by transaction efficiency. He concluded that population growth can provide scope for the division of labor that leads to productivity progress.
Nusrat and Arif (2008) analyzed the effect of human capital on economic development for the economy of Pakistan for the time period 1990-2005. The conclusion of the study was that Investment in the human capital increases the economic development in the Urban areas while dismal in the rural area particularly in women. Pakistan can take advantage from investment in the human capital and more employment options for the target to achieve economic development.
Dawson and Tiffin (1998) used time-series data to analyze a long-run relationship between economic development and population growth in India. They used per capita income and population growth as two variables. The study used ADF unit root test for the analysis of the relationship between two variables. They concluded that in long run Population growth neither causes per capita income growth nor it is caused by it in the case of India.
Bucci and La Torre (2007) used a two-sector endogenous growth model. They pointed out that population growth may have a negative effect or ambiguous effect on a countryâs economic development. They highlighted that when human capital and physical capital are substitute, the increase in population have a negative impact on economic development. On the other strand, when human capital and physical capital are complementary the increase of population growth can be ambiguous. The general effect of population growth depends on the contribution of population and human capital of the economic development.
Derek and Andrew (2009) through regression analysis conclude that the impact of population growth varies between being negative, positive and insignificantly different from zero. This study finds the broad set of methodological factors explaining the variation in population growth by the time series data sets.
Meneu and Climent (2003) studied the relationship for Spanish economy between demographic economic variables for the year 1960-2000. Bivariate Causality test was run for the variables. The result of causality showed that total fertility responds positively with the increase in Gross Domestic Product (GDP) and Infant Mortality does not cause total fertility other factors affect it to increase.
Furuoka (2005) case study for Malaysia examines the relationship between population growth and income. The paper used Error correction model and concludes that there exists a long-tun equilibrium relationship between per capita Gross Domestic Product (GDP) and population growth.
Julian Simon (1996) studies the relationship for the developing countries and states that there exists a positive relationship between population growth and economic development. As demographic trends pushes economic development and promotes a rise in living standards. Population growth encourages competition In the business activities as population increases the potential market size increases and new entrepreneurs enter the market to set business.
Bloom and Williamson (1997) found that demographic factors are important determinants of economic growth. The study paper states that population growth doesnât really impact the economic growth performance but other factors like age distribution. The age distribution effect operates through the difference in working-age and dependent population. Their study found that population distribution explains as much as 1.4% to 1.9 % of GDP per capita in East Asia. In Southeast Asia, the estimated effect of population ranges from 0.9% to 1.8% of economic growth.
Conclusion:
The prime objective of this paper is to find out the impact of population growth on economic development of Pakistan, in order to be clear this paper have added important variable which are related to population growth and affect economic growth. This paper used twenty-one years annual data from 1993 to 2014. Moreover, the views in literature review reflect an open question about the effect of population on economic development as optimistic as well as pessimistic. This paper has taken into account the unemployment rate to clarify the impact of population growth on economic development. Because most of the least-developed countries blamed population growth as a hurdle for their underdevelopment not considered their inherent old prevailing problems. Unemployment is important for growth and development. Investment plans of a government effects the creditably of a country, Increasing investment in a better way might increase the production programs and providing more employment options to the people. The government of Pakistan should take into account the problem of unemployment. Once the country has got tremendous growth, reduced unemployment the population growth will be corrected of itself.