Population Growth, Factor Accumulation, and Productivity

This paper was produced by the Poverty and Human Resources Division of the World Bank’s Policy Research Department. It examines the relationship between population growth, factor accumulation, and productivity. It attempts to close the gap in empirical literature, which has mostly focused on the relationship between population growth and output per person. The author uses recent cross-country data on physical capital stocks and the educational stock of the labour force, in order to decompose the effect of population through factor accumulation and the effect through productivity. The study produced six findings:

  1. There is no correlation between the growth of capital per worker and population growth.
  2. 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.
  3. There is either no correlation, or a weak positive correlation, between the growth of years of schooling per worker and the population growth rate.
  4. Enrollment rates are even worse as a crude proxy for the expansion of the educational capital stock, as the two are negatively correlated.
  5. There is no correlation, or a weak negative correlation, between measures of total factor productivity growth and population growth.
  6. 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 labour force, not of changes in output per worker.

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