Population size and economic health

A question from Yahoo! Answers:

What is the relationship between population size and economic health?

Some people think our economy will be damaged when the U.S. population plateaus (because parents are finding large families too expensive).

But if you look at countries with serious overpopulation problems like Haiti and Rwanda, it’s obvious that when the population exceeds the available resources, the economy crashes.

Any economists out there who can clarify the relationship between population size and the health of an economy?

The title of your question surmises a relationship between population size and economic health. There is none. Take all countries in the world, pick any group by population, and you will see that the proportion of high-income to low-income countries will change very little between groups. Japan and Nigeria have approximately equal population sizes, and so do Luxembourg and Solomon Islands.

Your actual question, however, surmises a relationship population GROWTH and economic health. Robert Solow suggested that, other things being equal, high population growth should decrease the capital/labor ratio and thus lead to lower economic growth. The problem is, other things are not equal. Capital formation is not a constant; it depends on both the savings rate and international capital flows.

Population growth, on the other hand, depends on income; other things being equal, the higher the income, the lower the population growth. But again, other things are not necessarily equal; there is research that suggests that housing plays an important role, too. Families that live in single-family homes have higher fertility than families living in apartment units (this, by the way, single-handedly explains the difference in population growth between the U.S. and the rest of the industrialized world).

So, to summarize, there are more important things to the health of an economy than either population size or population growth…

Leave a Reply

Your email address will not be published. Required fields are marked *