Economics management help study On: Economic growth

Economic growth has been rendered to as the rise in the amount of gods & services available in order to satisfy the wants of the people of a particular country. Economic growth has been defined as an overall rise in the gross domestic product (GDP) of the economy. It must be noticed that, when any economy talks about growth, it takes into consideration all the factors which would help in the overall growth of the same. The ultimate growth of the economy could be ascertained by the standards of living of the population within a specified country.With a rise in the population of the various developing countries, it has been seen that all the economies want to rise in financial terms. Each & every economy wants to attain high levels of growth covering all the sectors. In order to gain high levels of wealth, the developing countries would be required to overcome the various barriers which would help to attain growth & development. The rise in the population amongst the developing countries has been referred to as one of the most significant factor in determining the economic growth of a particular country. On the other hand, shortage in the labor supply would lead to a decrease in the overall growth of a particular region. Increaser in the birth rate of a particular country would stress the various renewable resources available in the same.

Based upon the Solow model, fair relationship has been framed amongst the growth in population & the levels of development of a particular country. This would be measured in terms of the levels of output, consumption levels & capital per worker. This particular essay would take into consideration the various developing countries which have shown a consideration decrease in the overall population growth & are now richer as compared to the countries that had high levels of population growth. It must be seen that, the developing countries that previously were low in population have been termed to be richer as compared to the countries with high levels of growth in the population.Majority of the developing countries have an impression that, high population growth rate leads to poverty, poor health, decline in the overall standards of living, social problems, famine, ecological disaster etc. According to many economics survey’s, high levels of population growth would lead to hindrance in the growth & development of the economy. With an increase in the population of any given developed economy, the demand for the resources   have been increased which has led to a decline in the per capita income of the same.

It shall be understood that, more number of people means more revenues would be drained by the government of the developing country which will lead to a reduction in the overall opportunities for improvements. Based upon Neo-Malthusian, an increase in the population would lead to reduction in the wages as well as the standards of living. With the help of the “Law of population”, population would be required to grow in geometric progression whereas an increase in the food supply would be arithmetic progression. This shows that there will not be a balanced growth between the rise in food & population growth.

The growth in the population levels in the developing countries have been done due to the dependent children. The percentages of children which are below 15 years of age are approximately 40% of the entire population. It must be kept in mind that, in most of the developing countries the labor force would be supported by twice the number of children in the richer countries.

It has been noticed that, growth in the population has been rendered to as one of the biggest problems which would lead to a reduction in the growth of the same. A list of total 40 developing countries has been selected. The list of the first 10 countries take into consideration, all those countries which had high levels of population growth in the 1960s – 1970s. The next 10 countries which have been selected where population growth is much lower now than in the earlier period.Group 1：

Group 2:

Resource: World Bank, World Development Indicators

Based upon the data provided by the World Bank, chart 1 showcase a scatter plot taking into consideration the two variables i.e. population growth & income per person for the ten developing countries selected. It can analyze that, the countries have low levels of population growth; the GDP per capita is quite high. Whereas on the other hand, the next ten countries selected have high rate of population growth & low GDP per capita. It must be taken into consideration that, counties with high population growth would lead to a stumpy levels of income. Based upon the Solow model, all those countries which have high population growth would have slow & steady high levels of capital per worker. Chart 2 depicts the countries which possess low levels of population growth amongst the developing countries with high levels of GDP per capita.Chart 1:

(a) Scatter plot of data shows two groups of countries

(b) Scatter plot of data with the line of best fit

Resource: World Bank, World Development Indicators

To continue our analysis about population growth and economic growth, it is necessary to present the Solow growth model. This model of economic growth, developed in the late 1950s by Nobel laureate Robert Solow (1956) and Trevor Swan (1956) of the Australian National University. This model has become the basic framework for economic growth, it is the expression of neoclassical approach and it examines the economy as it grows over time. The Solow growth model asserts that there are three major recommendations for economic growth, which are the raise in the saving rate, the population growth and productivity growth. To discuss weather countries that showed a substantial decline in population growth are richer now than countries where population growth is still high, we focus on the factor of population growth, which is presented in Figure 1.2.

The population growth rate has two main effects when the economy is in the steady state. Firstly, higher population growth rate tends to lead a higher steady state growth, because in the long – run all the aggregate variables increase at the population rate of growth. Secondly, the population growth determines the rate of saving, which must be used for capital widening. An increase in the population growth rate means that workers are entering the labor force more rapidly than before. These new workers must be equipped with capital. Thus, to maintain the same steady-state capital-labor ratio, the amount of investment per current member of the work force must rise. As Figure 1.2 shows, the increase in population growth rate causes the upward shifts of the line representing population growth and depreciation. After the pivot of the steady-state investment line, the new steady state is at point 2. The new steady-state capital-labor ratio is K2*, which is lower than the original capital-labor ratio, k1*. Because the new steady-state capital-labor is lower, the new steady-state output per worker and consumption per worker will be lower as well. Thus the Solow model implies that increased population growth will lower the living standards. The basic problem is that when the worker force is growing rapidly, a large part of current output must be devoted just to providing capital for new workers to use. This result suggests that policies to control population growth will indeed improve living standards.Figure 1.2

Resource: Mishkin, Frederic S (2012), Macroeconomics, Global ed

China is one of the best examples for reducing population growth rate is good for economic growth. According to Reuters (1999), Chinese President Jiang Zemin said his biggest problem was the country’s large population when focusing on economic development and open China wider to the outside world. He stressed that even China has made great achievements in the last 50 years and these become very small achievements when they are shared among almost 2 billion people. Should we take a closer look at the most recent statistics of China given by HDR (2001) before we judge whether Jiang’s statement was right.  The People’s Republic of China had a total population of 1,285.2 millions, and its annual population growth rate in 2000-2015 was estimated as 0.6, both were ranked the third in the world.  GNP per capita (PPP US $) was raised from 530 to 4,020 during the period of 1995-2001. Since 1970, infant mortality rate per 1,000 live births had decreased from 85 to 31. Adult illiteracy rate of age 15 and above in percentage was 14.2. With these figures, HDI value was calculated as 0.721.In the year of 1979, China adopted the ‘one-child policy’ as its birth control program as part of its attempt to break out of the underdevelopment trap. Traditional Chinese thinking suggests that sons working should support financial security of a family and only sons can receive inheritance from their parents. This gives ideas why there is a need of giving birth to more children than parents actually expected. The ‘one child policy’ stipulates each couple living in the cities should only have one child, unless one or both of the couple are from an ethnic minority or they are both only children. China’s annual population growth rate had slowed down by 0.7% since 1975. Before that, if fertility rates remain unchanged, its population will reach 2 billion by 2050.

It could be seen that in the second list of 10 countries, most of the African countries have high rate of population but low levels of per capita income. It could be seen that, Africa has been on debt whereas the Sub-SaharanA lack of health care, education and employment are caused also. Africa is largely in debt and Sub-Saharan Africa pays more than $12 billion in debt service charges annually and owes approximately $8 billion more that it cannot pay. An Oxfam campaign report (2012) states that, “currently, African countries owe a total of $300 billion to foreign creditors which clearly shows the crippling burden which fundamentally hampers progress in every sector of the continent.” Therefore as well as not being able to improve its situation, Africa is also forced to export large amounts of its resources to keep up with its debt payments, which consequently means that more people in the continent starve, and the famine worsens. Plus in its current situation, Africa can never afford to pay of its debts and so Africa cannot stop the amount of famine increasing or the amount of resources decreasing, and hence the continent is becoming ever more unsustainable. The major lack of food security and rampant poverty has left the continent with a population that is the most undernourished in the world.

In conclusion, in Solow model, higher population growth lowers the level of output per person. In other words, countries that showed a substantial decline in population growth are richer now than countries where population growth is still high. From 1960 to 2008, the slower population growth rate countries, such as China, Indonesia and Malaysiahave lots of achievements on their economic growth. However, Pakistan, Nigeria and Iran as the fastest population growth rate countries, if not control their population growth, the economic recession is hard to avoid. Economics problem is complicated and population growth is only one of the most important influence factors to the developing countries become rich. As developing countries, they not only should pay attention to their population growth problem, but also should take full advantage of labor and capital.

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