Population Growth and Wealth

Matthew Yglesias has an interesting post discussing the relationship between economic growth and population growth. He thinks that it’s possible to have long-term population decline alongside positive economic growth (though he says he’s not in favor of a declining population).
I’m not sure that’s correct. If a population is falling, then outside of war or disease, it must be due to either emigration or lower birth rates. That’s got to have a big impact on growth and innovation. In the other words, the size of GDP itself may boost per-capita GDP. If there’s heavy emigration, I would guess that would take a heavy toll on production since the émigrés would more likely be younger and more entrepreneurial.
If the falling population is due to declining birthrates, then that means the population is getting older. That would probably skew consumption away from innovative sectors. Not to mention that a falling population would place heavy pressure on a country’s social welfare obligations.
Yglesias posts a chart from Gregory Clark’s book, A Farewell to Alms: A Brief Economic History of the World which shows the lower population in pre-modern Britain led to higher wages. Sure, if all my neighbors are dropping dead from the plague my wages will rise, but that’s per-capita wealth which is very different from a growing economy.
The key part is the fitted line on Yglesias’s post that existed before Britain broke free from the Malthusian trap. I assume that the line would have to have a slope less than 0.5 (though it doesn’t appear that way). Either way, I think we can all agree that if another Great Plague comes along, wage growth won’t be a high priority.

Posted by on April 6th, 2009 at 1:52 pm


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