Empirical investigation on the dynamics effects of population and economic growth in Ethiopia: an application of the VEC model

Abstract

AbstractMost of the previous economic theories and empirical studies revealed that the relationship between population and economic growth is controversial and inconclusive in different parts of the world. However, previous studies have attempted to examine the relationship between population and economic growth, but their results have been vague or not even sufficiently realistic to address the issue practically. Thus, cognizant of this fact, this study investigates the dynamic effect of population and economic growth in Ethiopia. This study used a Vector Error Correction Model (VECM) and estimated using annual data for the period 1991-2022. The study found that, in the short run, high population growth was associated with increases in real gross domestic product. However, in the long run, population expansion hurts economic growth. Furthermore, the analysis shows that there is no causal relationship between population growth and economic growth by using block exogenity test. In conclusion, population growth has a greater short term positive impact on economic growth than it does in the long term. This study suggests that the government should adopt a pro-natal strategy that uses incentives for agricultural output in the short term to encourage individuals to have more families; the government should promote anti-natal policies to sustain economic growth that encourages individuals to have fewer children in the long run. Additionally, instead of solely focusing on population growth, the study suggests that the government prioritize and sustain economic growth by centralizing and improving the real money supply.

Keywords

• Population
• VECM
• economic growth
• Ethiopia
• George Mudimu, Development Sciences, Marondera University of Agricultural Sciences and Technology, Marondera, Zimbabwe
• Development Policy