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Population growth, factor accumulation, and productivity

  • Pritchett, Lant

In research on how population growth affects economic performance, some researchers stress that population growth reduces the natural resources and capital (physical and human) per worker while other researchers stress how greater population size and density affect productivity. Despite these differing theoretical predictions, the empirical literature hs focused mainly on the relationship between population growth and output per person (or crude proxies for factor accumulation). It has not decomposed the effect of population through factor accumulation and the effect through productivity. The author uses newly created cross-country, time-series data on physical capital stocks and the educational stock of the labor force to establish six findings: There is no correlation between the growth of capital per worker and population growth. The common practice of using investment rates as a proxy for capital stock growth rates is completely unjustified, as the two are uncorrelated across countries. There is either no correlation, or a weak positive correlation, between the growth of years of schooling per worker and the population growth rate. Enrollment rates are even worse as a crude proxy for the expansion of the educational capital stock, as the two are negatively correlated. There is no correlation, or a weak negative correlation, between measures of total factory productivity growth and population growth. Nearly all of the weak correlation between the growth of output per person and population growth is the result of shifts in participation in the labor force, not of changes in output per worker.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1567.

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Date of creation: 31 Jan 1996
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Handle: RePEc:wbk:wbrwps:1567
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