In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e. production at "full employment," which is caused by growth in aggregate demand or observed output. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP ( ).
Often, the concern about economic growth focuses on the desire to improve a country's standard of living—the level of goods and services that, on average, individuals purchase or otherwise gain access to ( ).
GDP per capita is not a measurement of the standard of living in an economy. However, it is often used as such an indicator, on the rationale that all citizens would benefit from their country's increased economic production.
It should be noted that if population has grown along with economic production, increases in GDP do not necessarily result in an improvement in the standard of living. This is due to population is one of the main variable to calculate GDP Per Capita:
GDP Per Capita=real GDPTotal Population
Total population and its growth in each country will differ from other countries. Population growth is determined by four factors, births(B), deaths(D), immigrants(I), and emigrants(E). Using a formula expressed as
∆P≡B-D+(I-E)
In other words, the population growth of a period can be calculated in two parts, natural growth of population (B-D) and mechanical growth of population (I-E),in which Mechanical growth of population is mainly affected by social factors, e.g. the advanced economies are growing faster while the backward economies are growing slowly even with negative growth.
There are many factors affecting population growth of a country. Factor such as culture, religion, geographical posistion, economy condition of a country, political issues, education, and many more. Factors affecting the population growth of a country, and its correlation with GDP Per Capita will be disuccused further in the body.
Body
Solow Growth Model
Solow growth model explains the relationship between population growth and the level of output per person. Solow Growth Model believe that ain a steady state, higher population growth lowers the level of output per person. When population growth rises from n1 to n2, there will be a shift in depreciation plus capital dilution line from the (δ + n1)kt to (δ + n2)kt. At the previous steady state K1*, investment is less than the depreciation and capital dilution, so changes in kt is less than zero. The capital ratio will fall, eventually moving to k2*. Eventhough the growth rate of output and capital have risen from n1 to n2, output per worker falls because y2* = aK2*0.3 is below 1* = aK1*0.3.
(δ + n2)kt
(δ + n2)kt
Investment and Depreciation plus Capital Dilution
Capital-Labor Ratio, kt
Investment and Depreciation plus Capital Dilution
Capital-Labor Ratio, kt
(δ + n1)kt
(δ + n1)kt
1
1
2
2
sAKt0.3 sAKt0.3 K2*
K2*
K1*
K1*
There is evidence to support the Solow result that higher population growth will have a lower GDP Per Capita i.e. makes the average person in a country poorer. The scatter plot of personal GDP per capoita against population growth rates in nearly 20 countries in graph 3 (see appendix) provides the support for solow growth model. The graph shows a downward sloping trendline indicating that the higher the population growth, the lower the GDP per capita will become. Countries such as China and India which are trying to lower the population growth with various policy, have a higher GDP per capita compare to some African countries such as Liberia and Niger whom have less concern regarding the population growth in their country.
Education
Education levels are positively associated with demand for and use of contraception and negatively associated with fertility and desired family size. According to Jejeebhoy (1995) women’s education influences reproductive behavior through five types
