Can Population Pressure Cause Sustainability Problems to World Economic Growth? An Analysis of the Recent Past

• Authors: Enriqueta Camps.
• BSE Working Paper: 1354 | June 22
• Keywords: human capital. , sustainability , inflation , world population pressure , output per capita
• JEL codes: A11, A12, I15, J11, N3

In this paper we present further quantitative evidence for the impact of population growth on the world economy (prices, per capita GDP) during the second demographic transition. We use population growth as a proxy for the evolution of aggregate demand at the world level as well as the United Nations population-growth projections to the end of the twenty-first century. Since population can be considered as an endogenous variable of the economy, an Instrumental Variable analysis has been developed in order to obtain different and more reliable results on the causality effect of population growth on the world economy. We compare worldwide results with the Instrumental Variables results of the continents that currently represent the greater population pressure on supply: Sub-Saharan Africa and Asia. From this analysis we conclude that inflation rates are mostly explained by the purchasing power of populations – that is, the aggregate demand – rather than by population pressure. On the other hand, population ageing in the richest countries (such as OECD and China) have a life-cycle effect that impacts world measures on economic growth: a marginal increase of population causes a marginal decrease of GDP per capita.