Where growth is concerned, is population destiny?

The Economist

Originally Posted: April 17, 2019

For centuries prior to the Industrial Revolution, Asia’s massively populous societies made the continent the world’s centre of economic gravity. Industrialisation in Europe and North America in the 19th century briefly knocked it from its perch. But now their collective economic might, measured in real output on a purchasing-power-parity basis, is forecast to account for more than half of global production by 2020. Was the West’s period of dominance an anomaly, which could only ever have been short-lived? Is population destiny?

It stands to reason that countries with larger populations might enjoy long-run economic advantages. People are the raw material of economic growth, after all. The more there are, the greater the likelihood that one becomes a Gutenberg or a Watt. In a world without much international trade, populous countries offer the largest markets, and comparatively more opportunity to boost economic output through specialisation and trade. Projecting economic growth rates is fantastically hard even over very short time horizons; over centuries, it is as good as impossible. But there are worse strategies than betting on the places with the most people.

Klaus Desmet of Southern Methodist University, Dávid Krisztián Nagy of crei, a research institute, and Esteban Rossi-Hansberg of Princeton University do just that. In a paper that last month won them the Robert Lucas prize, which recognises excellent research in political economy, they build a model that yokes economic performance to population size, within which they can run time forward by hundreds of years to watch the balance of economic power change. Long-run growth, they suggest, is driven by improvements in technology. And more populous countries should accumulate more innovation than smaller ones do because the return on developing a new technology is higher—there are more people to buy Edison’s light bulb and to enrich Edison, and therefore more incentive to invent the light bulb in the first place. READ MORE

By | 2019-04-23T10:44:56-07:00 April 24th, 2019|Dedman College of Humanities and Sciences, Dedman College Research, Economics, Faculty News|Comments Off on Where growth is concerned, is population destiny?