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Income and Population Growth: A Simultaneous Equations Model

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  • Rodrigo Valdés

Abstract

This paper estimates a simultaneous equation model of income and population growth. The framework is based on the neoclassical growth model augmented with a population growth equation. Both limited and full information non-linear estimation methods are used, as well as different specification tests check the consistency of the model. The results show that the proposed simultaneity produces an important bias in the "typical" OLS income equation used in the empirical growth literature. The population growth parameter increases by almost 50\1/o (in absolute value) in the standard income equation. Finally, the paper shows that a cultural aspect like religion matters in the population growth equation, but not in the income equation.

Suggested Citation

  • Rodrigo Valdés, 1997. "Income and Population Growth: A Simultaneous Equations Model," Working Papers Central Bank of Chile 14, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:14
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