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How would population growth affect investment in the future? Asymmetric panel causality evidence for Africa

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  • Simplice A, Asongu

Abstract

Our generation is experiencing the greatest demographic transition and Africa is at the center of it. There is mounting concern over rising unemployment and depleting per capita income accruing there-from. We look at the issue in this paper from a long run perspective by examining the nature of the relationship between population growth and a plethora of investment indicators: public, private, foreign and domestic investments. Using asymmetric panels on data spanning from 1977 to 2007, we investigate effects of population growth on investment from Granger causality models. Our findings reveal a long-run positive causal linkage from population growth to only public investment. But for domestic investment, permanent fluctuations in human capital affect changes in other forms of investments. Not unexpected, no significant short-run causal relationship is found. For economic implications, sampled countries should take family planning and birth control policies seriously. Though growth in population may appear not to have an impact on investment in the short spell, in the distant future, it strangles public finances. Therefore measures should be adopted such that, rising unemployment rate resulting from population growth be accommodated by private sector investments. Seemingly, structural adjustments policies implemented by sampled countries have not had the desired investment effects.

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  • Simplice A, Asongu, 2011. "How would population growth affect investment in the future? Asymmetric panel causality evidence for Africa," MPRA Paper 30124, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30124
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    More about this item

    Keywords

    Productivity; investment; human capital; asymmetric panel; causality; Africa;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • J00 - Labor and Demographic Economics - - General - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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