The Impact of Population Growth on Economic Growth: Evidence from Ethiopia using ARDL Approach

Abstract

There is no consensus on the impact of population on economic growth as economists are torn with different varying theories and empirical findings.This study therefore analyzed the impact of population growth on economic growth in Ethiopia using annual time series data over the period 1980/81-2018/19 in a multivariate framework. The study is theoretically based on neo-classical growth model and empirically on the ARDL Methodology along with Philips Peron Unit root tests and other important time series techniques. Results from ARDL Bounds testing indicated that there exists co-integration among population, export, import, trade openness, government expenditure and economic growth for real GDP is taken as dependent variable. The empirical model revealed population growth, export growth and import growth having significant positive impact on economic growth of Ethiopia both in the short-run and long-run while trade openness has significant negative effect on same and government expenditure growth has insignificant impact. Moreover, Toda-Yamamoto and Dolado-Lutkepohi as well as Innovative Accounting Techniques (that is, IRFs and FEVD) approaches to Granger causality analysis showed the existence of strong bidirectional causality between population growth and economic growth. The implication of the finding is that population is an asset rather than a burden for the country, and therefore; a carefully planned and productive population advance along with well managed macro variables would sustain the growth of the its economy.

Keywords: ARDL, Causality, Economic Growth, Ethiopia, Population Growth

DOI: 10.7176/JESD/11-3-02

Publication date: February 29^th 2020