AKSUM UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTEMENT OF ECONOMICS

THE RELATIONSHIP BETWEEN POPULATION GROWTH AND ECONOMIC

GROWTH IN ETHIOPIA

A RESEARCH PAPER SUBMITTED TO THE DEPARTEMENT OF ECONOMICS

IN PARTIAL FULLFILMENT OF THE REQUIREMENT OF BACHLOR OF ART
(BA) DEGREE IN ECONOMICS

BY;

CHALIE ENDALEW

ADVISOR;

BAWOKE ATNAFU

MAY, 2015

AKSUM, ETHIOPIA
 List of Figure and tables

Figure 1: GDP growth Rate comprise on

Figure 2: Trends of Economic growth , and

Population graph in Ethiopia

Table1: Relation ship between population and real GDP

Table 2: Trends of population and Economic

Growth

Table3: Estimation of population size and Growth rate of Ethiopia between (1900-2000)

Table 4: percentage of economically active

Population ( Age 15-65) by educational attainment.

Table 5:
Table of Contents
Content page

Acknowledgement I
Tisto of table and figure II
Acronyms III
Abstract IV
Chapter one

1. Introduction 1

1.1 Back ground of the study 1

1.2 statement of the problem 4
1.3. Objective of the study 6
1.3.1 General Objective 6
1.3.2. Specific objective 6
1.4 Research Questions 6
1.5.Scope of the study7
1.6 significance of the study 7
1.7 Methodology 7
1.7.1 Data source and data type 7

Chapter two
2. Literature Review 8
2.1 Theoretical Literature 8
2.1.1Definition 8
2.1.1.1 The “pessimistic” Theory :population change can fuel Economic growth 9
2.1.1.1.1 Malthus’s population view 9
2.1.1.4. The extremist Argument view 10

2.1.1.5. The Theoretical Argument view 15

2.1.1.6. The pessimistic three conclusions 12

2..2 The “ optimistic Theory population change can fuel12

1. Merc ant list view 13
2. The Neutralist theory population has no significant effect on Economic growth -----------13
2.2 Empirical Literature 15
2.2.1 Economic Growth 16
2.2.2. Trend of Real GDP growth in Ethiopia 16

Chapter Three
3.Data Analysis and Discussion 20
3.1Trends of population and Economic Growth 22
3.2 Growth rats in real GDP and population 24
3.2.1The relation ship between growth rate in R GDP and population 26

Chapter four
Conclusions and Recommendation
4.1Conclusion 27
4.2 Recommendation 13
Reference 29
 Abstract
Due to human beings dval role population is essential for economic growth. Many scholars argue
on this issue without consensus. In view of this fact the purpose of this study is to examine the
link between population and economic growth in Ethiopia.

The result of this study show that the rate of real GDP has improved significantly. But it has
been accompanied fluctuations leading to change in population growth rate. Although the rate of
growth in Real GDP have improved, the more pronounced increasing population growth.

By these result the researcher provides some recommendation to conserved bodies increasing
higher income to enables consumers enjoying better standard of living, government should
borrow aliltel amount of fund from other countries in order to creates higher tax revenue and
their is lessened to spend money on benefit as we as improved public services, by increase tax
revenue that government can improved national heat services and educational improvement.
 Acknowledgment

My special gratitude goes towards instructor Baweke Atnafu for his guidance
and constructive suggestions next to ( GDP I would also like to thank my family
for their contribution in terms of money and others.
 CHAPTER ONE
1. INTRODUCTION
1.1. Background of the Study
Population numbers had been few 2 million years ago on earth. When people started first
to cultivate food through agriculture some120 years ago the estimated world population is
no more than 5 million. From year 1 on our calendar to the beginning of industrial
revolution is around 1750, it tripled to 728 million people which is less than three quarter
of the total number living in India today . During 1750-1950 more than1.7 billion
additional people were added to the planets population numbers. But after four decades
the earth’s human’s population doubled again, bringing the total figure to around 5.3
billion. The world welcomed the twenty first century with over 6 billion peoples (Todaro,
2003).

World population grew to 7.06 billion in mid-2012 after having passed the 7 billion mark
in 2011. Latest official current world population estimate, for mid-year 2013, is estimated
at 7,095,217,980. Developing countries accounted for 97% this growth because of the dual
effects of high birth rates and young populations. Conversely, in the developed countries
the annual number of births barely exceeds deaths because of low birth rates and much
older populations. By 2025, it is likely that deaths will exceed births in the developed
countries, the first time this will have happened in history. (World population data sheet,
2012)

If this trend continues, it is projected that the total world population to be reaching at 9
billion in 2050 and 11 billion in 2200. However, by 1750 the population growth rate had
increased to 0.3% per year and by 1950 onwards tripling to 1% per year continuing up to
1970 when it peaked at 2.35%. Today world population growth rate 1.2% per year shows
low reduction because of family planning improvement uses and population policy. So,
currently the doubling time of the world population is 54 years (World Development
Report, 1990).

“Half of all the persons born in the world from now until 2050 will be Africans.” (Robert
Rothberg, 2011). By far, the largest regional percentage increase in population by 2050 will
be in Africa, whose population can be expected to at least double from 1.1 billion to about
2.3 billion. That projection, however, depends on the assumption that sub-Saharan Africa's
total fertility rate (TFR, the average number of children per woman) will decline from 5.1
to approximately 3.0 by 2050. That decline, in turn, assumes that the use of family planning
in the region will rise significantly. But recent surveys from many sub-Saharan African
countries have indicated that TFR decline is either slower than projected or is not taking
place at all. Only 20 percent of married women in sub-Saharan Africa use a modern form of
family planning, the lowest rate in the world.( World population data sheet 2012 )

Ethiopian population has grown steadily over the last three decades, from 39 million in
1984, when the first census was conducted, to 53.5 million in 1994 and 73.8 million in
2007, in the subsequent censuses. The population growth rate has declined slightly, from
3.0% per annum in 1984 to 2.9% in 1994 and 2.6% in 2007. (Ministry of health, 2007)
Ethiopia is the second-most populous country in Sub-Saharan Africa with a population of
about 92 million (United Nations, 2012). One of the world’s oldest civilizations, Ethiopia is
also one of the world’s poorest countries. The country’s per capita income of $410 is
substantially lower than the regional average (Gross National Income, Atlas Method). The
government aspires to reach middle income status over the next decade.(Bosuerup,1981)

Economic growth brought with it positive trends in reducing poverty, in both urban and
rural areas. While 38.7% of Ethiopians lived in extreme poverty in 2004-2005, five years
later this was 29.6%, which is a decrease of 9.1 percentage points as measured by the
national poverty line, of less than $0.6 per day. Using the Growth and Transformation Plan
(GTP), the target is to reduce this further to 22.2% by 2014-2015. (World Bank, 2012)

Population growth has positive factors in stimulating economic growth. Population growth
increasing large labor force means more productive workers and a large overall population
increases the potential size of domestic market and productive capabilities of a growing
population and its consumption demands. In areas of dense population a large number of
customers lived within a relatively small territory. Direct contact with customers was
possible and transport costs for product could be kept at a minimum. Manufacturing
industries required skilled workers and traders as well as the financial services and
administrative skill which were concentrated in urbanized areas. Directly productive
investments are supplemented by investments is growth social and economic
infrastructure roads, electricity, water and sanitation, communication and the like which
facilities and integrates economic activities.(Todaro, 2003)

Population growth has negative effect in economy growth. Population growth means that a
given level of output must be divided among an increasing number of people, so that an
increase in population growth rates beings down in the size of the per capita income, lower
the aggregate rate of savings, increases the dependency ratio in families because children
consume more than they produce and increase the poverty. It will also worsen inequality of
income among people, under pricing of infrastructural resources. Government provided
education; health and public transportation may all be subsidized. Direct transfers may be
infeasible because it may be impossible to credibly identify the poor. The people will be low
level of income, lack of facilities (education, health, roads etc.).Increase the global demand
for the foreseeable future. There is a growing competition for land, water and energy which
will augmented by climate change effects due to global warming’s (Lucas, 1995).

Developing countries in general our country in particular is characterized by high level of

young population and low level of old population due to low life expectancy, low living
standard, and poor economic privacy. Economically active peoples who are the pillar of the
country (15-64 age) and economically inactive population who put burden on country
development activity that include children (0-15 age) consists of 45% and elder (>65 ages)
is about 3% .The dependency ratio for our country is 0.86 which means for 86 dependents
need supports from a single active working people (CSA, 2008).

1.2 Statement of the Problem

It is clear that population is the major engine for economic growth and development in the
form of supplying labor force for different sectors. This implies that both skilled and
unskilled labors are streamed from the given population of the nation. In short a particular
nation should have sufficient population number so as to have enough human resources .
Nevertheless, population is a production input. But it becomes a burden for a country
unless the growth of population is balanced with economic performance of the nation.
Accordingly most developing nations are experiencing high population growth with low
economic performance. That is in many developing nations including Ethiopia the number
of population does not balance with economic performance. Therefore, according to
Malthus population growth theory, population is a major constraint (bottleneck) for
economic growth and development if the economy is not matured. ‘Without basic needs life
is uncertain” and population pressure has historically created necessity. Now here is this
more true than in agriculture, where increasing populations have historically placed
tremendous pressure was often relieved by the Malthusian weapons of famine and disease
that scarcity drove man to innovate, to create, or to apply methods of production that
accommodated the increased population by quantum jump in food output.

It is more likely that the poor need children for old age support. It is somewhat harder to
compare the relative costs of child bearing poor families are likely to have a higher degree
of labor force participation by females ,simply because additional income is of greater
importance. This raise the opportunity costs of having children. However it is also true that
growth in income creates a quantity quality trade-off in children.(Todaro,2003)

The issue of population growth has got attention in less developing countries in general
and our country particular .This is due to rapid population growth with unbalanced level of
economic growth results serious socio economic growth such as low living standard, low
income, poor health care, poor education, and etc. The problem of population growth is not
a problem of numbers rather it is a problem of human welfare and growth. If growth
entails the improvement in people’s levels of living-their income, health, education and
general well-being and it also encompasses their self-esteem, respect, dignity, and freedom
to choose. From this respect it is important to consider population situation in many least
developing countries can contribute to or detached from their chances of realizing the goal
of growth not only current generation but also for future generation .

The problem of population is much more than a food problem. It has a wider consequence
that makes it a general growth problem. A high rate of population growth not only has
unfavorable effect on improvement in food supply, but also intensifies the constraint
development of savings, foreign exchange and human resources. This means population
growth has both long term and short term effect on socio economic growth.

More over two arguments are given regarding population growth on economic growth that
belong to pro population growth according to conference conducted in 1974 at Cairo
population growth had desirable phenomena as large population lead to greater economic
scale due to greater demand for goods and services that can be produced through abundant
labor. In contrary Malthus suggest that high population means high stomach which in turn
reduce saving and investment domestically which were the most determinant of Least
developing countries economic growth. (Hajela, 1997)

This rigorous population growth is leads to many possibilities as well as problems. More or
less we all are aware of the problems created by overpopulation and this paper does not
intend to highlight those problems. Instead this paper will focus on the possibility of
population growth being associated with economic growth.

1.3 Objective of the Study

1.3 .1 General Objective
The overall objective of the study is to examine the relationship between population
growth and economic growth in Ethiopia-.

1.3.2 Specific Objectives

 To assess the relationship between population growth and economic growth.

 To evaluate the trend of economic growth in Ethiopian economy.
 To forward possible policy intervention areas.

1.4 Research questions

This research work is guided by the following questions:

 Does population growth really bring in economic growth?

  What is the practical relationship between economic growth, and
population growth?
 Is population growth a problem or an asset or not for economic growth of
Ethiopia? Which theory is related in Ethiopian context, i.e., pessimists,
optimists, or neutralist theories about population and economic growth?

1.5 Scope of the study

The study is confined to assessing population and economic growth in Ethiopia. Besides, to
evaluate trend of economic growth of the country and show the magnitude of economic
growth in the long run.

1.6 Significance of the study

 It may serves as a mirror in showing the relationship between economic
growth with population growth at the same time economic growth in Ethiopia.
 The study comes up with its own recommendation which may give some sort of
insight for policy design regarding population and economic growth in Ethiopia
 It creates awareness about the relationship between population growth and
economic growth in Ethiopia.
.

1.7 Methodology

1.7.1 Data source and data type

In this study secondary data is employed, because secondary data on subject area is
readily available and reliable, furthermore it is very difficult and almost impossible to use
primary data with the time and resource the researcher has at his disposal. The data was
obtained from Ethiopian economic association (EEA), ministry of finance and economic
development (MOFED) and central statics agency (CSA) with related contents.

1.7.2 Data presentation and analysis

After collecting the available data descriptive statistics is used for the purpose of analysis.
Moreover, percentage and tables are employed to present the analyzed data.
 CHAPTER TWO
2. LITERATURE REVIEW
2.1 Theoretical Literature

Key conceptual consideration in economic growth is the recognition that population is

central in growth issues and hence population concerns would be treated as an integral
part of the broader socioeconomic system. The framework for integrating population in the
development planning process requires an appreciation of the relationship between socio-
economic and demographic issues.

Substantial disagreements, have been observed between economics concerning to whether

population booms should be viewed as a serious problem or not. These individuals are
classified under the pessimistic view, optimistic view and neutralist view.

2.1.1Definition
In terms of human biology the encyclopedia Britannia, population growth is defined as a
whole number of people occupying an area (Such as a country or the world) continually
being modified by increases (births and immigration) and loss (deaths and emigration).

On the other hand, population growth as put by international encyclopedia for the social
science, is the number of persons living in a given area at given moment of time.
But the growth is not necessarily positive or monotonic; it is the sum of natural increase
(births minus deaths) and net migration (immigrants minus emigrants). But each of these
balances and their sum can be negative. Apparently, population growth equals natural
increase only where net migration is nil or negligible, insignificant.
The relationship between population change and economic growth remains a subject of
debate among economists and demographers. They continue to disagree about whether
population change is (a) restricts, (b) promotes, or (c) is independent of economic growth.
Proponents of each view can point to research evidence to support their cases.
The utility of this debate has been hampered by one shortcoming: it’s almost exclusive
focus on population size and growth. Little attention has been paid to a critical variable, the
age structure of the population (that is, the way in which the population is distributed
across different age groups) and how it changes when populations grow.

2.1.1.1THE “pessimistic’’ THEORY: POPULATION CHANGE CAN FUEL ECONOMIC GROWTH

The proponents of this view argue that, population growth is liability for LDC than asset.
They said that population growth not only has an adverse effect on improvement in food
supply but also intensifies the constraint development of savings, foreign exchange and
human resources. To them population growth is undesirable, because of the entire social
and economic consequences that excess population may result (Ray, 1998).

This group argues that economic growth cannot continue as it is now that is, there is limit
to economic growth. They also tell that economic system collapse in the future. According
to them the limit to growth is that several resources are fixed. But the demand for these
resources grows exponentially. This makes resources to be exhausted and growth without
these resources is impossible.

Countries with higher population growth rates have experienced faster conservation of
land to agricultural uses, putting additional pressure on land and natural habitual. For
instance, in many places (Ethiopia, southern Malawi, Eastern Nigeria, and Sera Leon)
farming is being intensified through shorter fallow periods rather than through the use of
better inputs or techniques. Rapid population growth in these areas has led to the
depletion of soil resources and to stagnating or declining yields. In some circumstance,
especially in rural Africa, population growth has been too rapid that traditional practices
have been unable to adopt means to prevent degradation. The result is thus, deforestation,
depletion of natural resources (like water resources, loss of natural habitat, etc.). They have
their own implication on economic growth (Tietenberg, 2003).

2.1.1.1.1 Malthus’s population View

According to Brue (2000) define Malthus’s view depends on the first edition of an essay on
the principle of population. According to this essay, Malthus set out “to account for much of
that poverty and misery (condition) observable among the lower classes of every nation.”
Here he presented his law of population: population when unchecked increases
geometrically: subsistence increases at best only arithmetically. That is, population tends to
increase at the rate of 1,2,4,8,16,32 and so forth whereas the rate of increase of subsistence
is at best only 1,2,3,4,5,6. He pointed to the rapid population growth in America (the India
of it day) to proof his propositions.

Malthus also proposed two methods of controlling population growth. The first is a
preventive check like moral restraints including late marriage, celibacy refraining from
sexual intercourse and artificial restraints which include all methods of contraceptive and
these preventive checks refer to the steps adopted by man himself.

The second method he recognized is positive checks to population, these that increase the
death rate. These were famine, misery; deadly continues disease, and war. Malthus
elevated these to the position of natural phenomenon or laws; they were unfortunate evils
required to limit population. These positive checks represent punishments for people who
had not practiced moral restraint. If the positive checks could somehow be overcome,
people would face starvation (die of hunger), because a rapidly growing population would
press up on a food supply that at best would grow slowly.

Based on Malthus view, mill also suggested the negative effects of population. He was
conscious of the evil effects of a rapid increase population. He looked the problem both in
terms of its economic consequences in social and moral generation. The economic effect of
population growth is it’s ever use of natural resources whereas its moral effect is the
overcrowding of family (Gills et al, 1996)

2.1.1.1.2 The Extremist Argument View

The extreme version of the population as problem position attempts to attribute almost all
of the world’s economic and social evils to excessive population growth. Unrestrained
population is seen as the major crises facing human kind today. It is seen as the principal
cause of poverty, low living of life, malnutrition, health, environmental degradation, and a
wide array of other social problems. Value-laden and designed to cause fires term as
“Population bomb;” or “Population explosion” is tossed around at will. Indeed, dire
prediction of world food catastrophes and ecological disaster are attributed almost entirely
to the growth in world numbers. Such as extreme position leads some of its advocates to
assert that “world” (i.e. LCD) population stabilization or even decline is the most urgent
contemporary task even if it requires severe and coercive measures such as compulsory
sterilization to control family size in some of the most populated developing countries like
India, and Bangladesh (Todaro,2003).

2.1.1.1.3 The Theoretical Argument View

The population poverty cycle theory is the main argument advanced by economists who
hold that too rapid population growth yields negative economic consequences and thus
should be real concern for developing countries. Advocates start from the basic proposition
that population growth intensifies the economic, social, and psychological problems
associated with the prospects for that better life for the already born by reducing savings
rate at the household and national levels. It also severely draws down limited government
revenues simply to provide the most undone economic, health and social services to the
additional people. This in turn further reduces the prospects for any improvement in the
levels of living of the existing generation and helps transmit poverty to future generations
of low income families. Widespread absolute poverty and low levels of living are seen as a
major cause of large family size, and large families retard economic growth, it follows that
more egalitarian(equal right for all) economic and social development is a necessary
condition for bringing about an eventual slowing or pause of population growth at low
levels of fertility and mortality.

But, according to this argument, it is not a sufficient condition that is, growth provides
people with the incentives and motivations to limit their family size, but family planning
programs are needed to provide them with the technological means to avoid unwanted
pregnancies. Even though countries like France, Japan, the united states, Great Britain, and
more recently, Taiwan and South Korea were able to reduce their population growth rates
without widespread family- planning, it is argued that the provision on these services will
enable other countries desiring to control excessive population growth to do so more
rapidly than if these family-planning services were not available (Ray, 1998).
 2.1.1.1.4 The Pessimistic Three Conclusions
The first suggests that within a time span of less than 100 years with no major change in
physical, economic, or social relationships that have traditionally governed world
development, society will turn out of the non-renewable resources on which the industrial
basis depends. Where the resources have been depleted, precipitous collapse of economic
system will result, manifested in massive unemployment, decreased food production and a
decline in population as the death rates soars. There is no smooth, no gradual showing
down of activity; rather the economic system consumes successively large amounts of
resources until they are gone. The characteristic behavior of the system is overshoot and
collapse.

The second conclusion of the study is that piecemeal approaches to saving the individual
problems will not be successful. To demonstrate this point, the author arbitrarily double
their estimates of the resource base and allow the mode to trace out an alternative vision
based on this new higher level of resources. In this alternative vision the collapse still
occurs, but this time it is caused by excessive population generated by the increased place
of industrialization permitted by the greater availability of food would become the binding
constraint.

The third and final conclusion, the study suggests that overshoot and collapse and can be
avoided by an immediate limit on population and pollutions, as well as cessation of
economic growth. The portrait pointed shows only two possible outcomes: The
termination of growth by self-restraint and conscious policy an approach that avoids the
collapse or the termination of growth by a collision with natural limits, resulting in the
social collapse. Thus, according to this study, one way or the other, growth will case
(Totenberg, 2003).

2.1.1.2 THE “OPTIMISTIC’’ THEORY: POPULATION CHANGE CAN FUEL ECONOMIC GROWTH
In contrast to the proponents of pessimistic view, optimists argue that large population
enhances resource development. The propagators of such idea argued that there is no limit
to growth. All what is needed is better human institutions. They posited virtually unlimited
potential for the expansion of material resource necessary to support a growing
population. Thus, to them the sole constraint on the environment was the shackling effect
of social relation of production, geared to the needs either of a renter or a capitalist class.
Once these social relations were changed to the account of the needs of the majority then
the elasticity of economic development become unlimited (Breeching et al, 1993).

2.1.1.2.1 Mercantilist View

The desire for a large population intensified in the 17 th century in Europe under the
influence of mercantilism. They suggested that not only would a sizable, industrious
population provide an abundance of soldiers and sailors ready to fight for the glory and
wealth of the nation, but it would keep labor supply high and wages therefore low. The
advantage of these low wages would enable lower prices on exports, thereby increasing the
inflow of gold and reduce idleness and promote greater participation in the labor force.

The central aim of this view was to increase power and wealth of nation. It was thought
that population growth would contribute greatly to existence of all forms of life on the
planet is jeopardized by population growth. In the provocatively titled book ‘the population
Bomb.’ Mercantilists has argued that population is not merely an important problem but in
ensuring long-term survival of the species (Tietenberg, 2003).

Generally, unlike pessimistic views, that suggested excessive population growth leads to
underdevelopment, the optimists argued that population growth leads to technological
innovations that increase productivity and hence improve the economic growth.
As this statement indicates, Marx held that poverty was entirety consequence of
unemployed or underdevelopment conditions due to the inability of the capitalistic system
to provide jobs for all regardless of the speed with which population increase.

2.1.1.3 THE NEUTRALIST THEORY: POPULATION CHANGE HAS NO SIGNIFICANT EFFECT ON

ECONOMIC GROWTH
In his great "Inquiry into the Nature and Causes of the Wealth of Nations" (1776),
Adam
Smith asked why some countries were richer than others. He found his answer in the
division of labor, which allowed workers to become more productive by honing their skills
at ever more specialized tasks. In recent years, economists considering the economic
effects of demographic change have been more interested in Adam Smith, and his narrative
of the power of the market, than in Thomas Malthus’s dire predictions about population.
Most economic analysis has examined the statistical correlation between population and
economic growth and found little significant connection. Though countries with rapidly
growing populations tend to have more slowly growing economies, this negative
correlation typically disappears (or even reverses direction) once other factors such as
country size, openness to trade, educational attainment of the population, and the quality
of civil and political institutions are taken into account In other words, when controlling for
other factors, there is little cross-country evidence that population growth impedes
economic growth. This result seems to justify a third view, population neutralism.

The neutralist theory is the dominant view today. Although there are some variations
within the neutralist school, with the NAS concluding in 1986 that, on balance. Slower
population growth would be beneficial to economic development of most developing
countries. The World Bank suggesting that in some countries bigger populations can boost
economic growth, the overall tendency is to accord population issues a relatively minor
place in the context of the wider policy environment.

Allen Kelley has suggested that population neutralism has in fact been the predominant
school in thinking among academics about population growth for the last half-century; for
example, the academic background papers to even the most pessimistic UN and NAS
reports are much more moderate in tone than the reports themselves. Kelley cites three
major research areas that influenced the rise of population neutralism in the 1980s:
 Natural resources: Exhaustion of natural resources was found not to be as strongly
affected by population growth as the Pessimists thought. Technology, conservation, and
efficient market allocation of resources all play a part in preserving natural resources,
and per capita income has been shown to be a key determinant of supply and demand
for these resources.
 Saving: The impact on economic growth of reduced saving as a result of population
growth is not borne out by studies.
 Diversification of resources: Where the Pessimists had thought that population
growth would lead to a diversion of resources from productive physical capital
 formation to less economically productive areas such as education and social welfare
programs, multi-country studies showed that this did not in fact happen to any great
extent.
According to Kelley, these studies, coupled with the impact of Julian Simon’s "The Ultimate
Resource" on extending demographers. View into the longer term, were crucial in bringing
neutralism to the fore, and the theory has since had an enormous influence on
policymakers in developing countries and on the international development community.
The Reagan Administration and several donor agencies sought to limit lending to
population programs and simultaneously appealed to neutralist theory.
Coale, A. and Hoover, E. (1958).

2.2. Empirical Literature

Bloom et al (1999) conducted a research on demographic changes and economic growth in
Asia using cross-country regression equations. The sample spans from 1965-1990. The
authors try to account for the effects of demographic variables on growth by introducing a
number of demographic variables such as growth rates of total and working age
population, the population of the initial working age population to total population, life
expectancy, and population density. The study reveals that variables such as the growth of
working age population and life expectancy has a positive effect on growth while total
population and population density has a negative effect on economic growth, impacts of
total population giving statistically insignificant. Thus the authors conclude that though the
overall rate of population growth had little effect on economic growth, most of the East
Asia’s economic ‘miracle’ is explained by demographic transition.

He on his part conducted a research on this area. He identified seven negative

consequences of rapid population growth on economic growth. These are economic
growth, poverty and inequality, education, health, food, the environment, and international
migration.
2.2.1 Economic growth
The great variety of growth experiences over time and across countries has sometimes
placed economic growth in a controversial light. Those who are concerned about the
distribution of wealth in the world often complain about the huge gaps that have arisen
between standards of living in the developed countries and in the less developed countries.
The real income of the average Ethiopian is perhaps just one-fortieth or one fiftieth of the
real income enjoyed by the average resident of Canada, New Zealand, France .economic
growth should not be blamed for the slow economic growth in some countries. Rapid
population growth lowers per capital income growth in most LDCs, especially those that
are already poor, dependent on agriculture, and experiencing pressures on land and
natural resources. (Lucas 1999)

2.2.2 Trend of Real GDP growth in Ethiopia

Ethiopia has experienced strong economic growth in recent years. With real GDP growth at
or near double digit levels since 2003/04, the country has consistently outperformed.
According to 2003 estimations, total GDP at Current Market Price was 54,585.9 Million
Birr, while in terms purchasing power parity it was $ 46.81 billion, with real growth rate of
-3.8%. Although GDP per capita is roughly about $100, the GDP Per Capita, PPP is $ 700.
Agriculture contributes 46% of GDP, while service and industry contribute 12.6% and
41.4% respectively. The country's development strategy has focused on agricultural
development as the catalyst for economic growth. It has eliminated discriminatory tax,
credit, and foreign trade treatment of the private sector and tried to simplify bureaucratic
regulations and procedures. From 1998-2002, the country achieved an annual average
economic growth rate of about 4.2% and annual inflation rate averaged – 0.4%. In FY
2002/03, GDP fell by 3.8 percent and inflation rose by 15.1 percent, mainly due to decline
in agricultural output by 12.2 percent caused by a severe drought. Agricultural output had
recovered somewhat during the 2003/04-crop year due to more normal rains. The
Government of Ethiopia and IMF estimated that the economy has registered a growth rate
of 11.6% and the agricultural sector 18.9% in FY 2003/04 (MOFED, 2004).

Ethiopia’s economy is highly vulnerable to exogenous shocks by virtue of its dependence

on primary commodities and rain fed agriculture.
Ethiopia has experienced major exogenous shocks during the past five to seven years.
These are notably droughts and adverse terms of trade (e.g., prices of coffee and fuel).
There is a strong correlation between weather conditions and Ethiopia’s growth
performance
Real GDP growth averaged 11.2% per annum during the 2003/04 and 2008/09 period,
placing Ethiopia among the top performing economies in Sub-Sahara Africa. This growth
performance is well in excess of the population growth rate and the 7 percent rate required
for attaining the MDG goal of halving poverty by 2015. Yet, a number of issues warrant the
attention of policy makers. (MOFED, 2009).

Figure 2.1 : GDP Growth Rate Comparison

 Source: world economic outlook, IMF data file.
Ethiopia’s recent growth has been accompanied by mounting macroeconomic pressures.
The country has had to grapple with the twin macroeconomic challenges of high inflation
and low international reserves. Pressures on prices and the balance of payment heightened
from FY 2007/2008 as a result of the global food and economic crisis. The difficult
macroeconomic situation Ethiopia faced during the period FY 2007/08 to 2008/09 is also
attributable to the structural weaknesses in the economy, including supply-side rigidities.
The growing domestic supply-demand gap, in the context of the surge in growth,
contributed to a rise of inflation and the depletion of foreign exchange between 2007/08
and 2008/09(IMF, 2010)

Figure 2.2 Trends of economic growth, and population graph in Ethiopia

 6.5

6.0

5.5

5.0

4.5

4.0

3.5

3.0
1980 1985 1990 1995 2000 2005 2010

RGDP L POP CPI

Source: Authors’ estimation.

 CHAPTER THREE
3. DATA ANALYSIS AND DISCUSSION

Table 1.1 Relationship between population Growth and Real GDP.

Year Total population Rate of total Real gross Domestic Rate of RGDP
Account in population product ( RGDP)
million ( RTP)
2000 61.6 2.59 184,625.4 7.41
2001 63.2 2.53 198,320.4 1.63
2002 64.8 2.62 201,561.3 -2.09
2003 66.5 2.70 197,335.5 11.72
2004 68.3 2.48 220,477.2 12.64
2005 70.0 3.42 248,354.8 11.53
2006 72.4 3.45 277,013.3 55.79
2007 74.9 2.53 309,686.8 11.18
2008 76.8 2.60 344,331.9 10.04
2009 78.8 2.41 378,907.4 25.53
2010 80.7 2.47 475,647.5 8.69
2011 82.7 2.53 517,026.5 9.82
2012 84.7 2.59 567,803.4 10.34
2013 87.0 - 626,557.0 -
Total 1032.5 34.92 4,747,644.9 990.54
Average 73.75 2.5 339117.5 70.75

Source; Ethiopian Central Statistical Agency

As seen from the above table 1.1 shows the relationship between population growth and
rate of GDP, in the year 2000 and 2001 rate of population and rate of GDP have positive
relationship, but after the year 2002. The rate of GDP is increasing at increasing rate, yet
rate of population have shown little change from the initial points (2000) up to the year
(2003).
From the table we observed also from the year 2003 to 2004 and 2005 there is an
increasing in rate of population but the rate of GDP have no significant changes in the year
between 2004 up to 2007. Although rate of population is decreasing from the rate of 3.45
to 2.53, 2.60, 2.41, 2.47, 2.53, and 2.59 in the year of 2006, 2007, 2008, 2009 2010, 2055
and 2012 respectively, but R GDP have been show a great change from 10.04 to 25.5 in the
year 2008 and 2009, and both rate of populating and RGD are decreased to 2.59 and 10.34
in the year 2012.

From the table a show above the rate of population and rate of GDP have the same
relationship, in 2002 rate of population is 2.62, but rate of GDP is -2.09.

According to the above table observed the rate of GDP and rate of population have more
/less show the same phenomenon. But optimistic view of population theory argued that
population growth have a Negative impact on short run economic development or
growth of economy process but in the long run population growth have positive impact on
economic development process.
3.2 Trends of population and economic growth

To assess the economic growth of the region compared to population per capital income is
important measurement variable. Here, Table 4 below shows regional GDP population size
per capital income. GRRGDP of population and GR of PCI.

Table 2 Real GDP and population growth

Year TRGDPin TPS(million) PCI in birr GRR GDP % GRP%

million birr
1994 9.1 13.7 664.23
1995 9.8 14.1 693 7.7 2.9 456.21
1996 10.5 14.6 721 7.14 3.55 179
1997 11.5 15 765 9.52 2.74 6.1
1998 10.4 15.4 670 -9.51 2.67 -12.42
1999 11.3 15.9 714 8.65 3.25 6.56
2000 12.3 16.3 151 8.85 2.5 5.2
2001 13.3 16.8 793 8.13 3.06 5.6
OTE 13.5 17.2 789 1.5 3.38 -0.75
2003 12.5 17.7 733 -4.44 2.9 -6.86

Source MOFED population unit and regional income accounting team

Note

-TR GDP = Total real GDP

-TPS = Total population size
-PCI = per capital income
-GRR GDP =Growth rate of real GDP
-GRP = Growth rate of population
 -GRPCI = Growth rate of per capital income

Note that from Table 2 number which are negative shows that in growth rate the given
variable annually .Initially in 1995 the total real GDP of the (Amhara) was about 9.10
billion Ethiopian birr while then through gradual in years the total GDP grows to 12.9
billion birr and at the same period the population amount was 17.7 million. In this period
per capital GDP (share per person) was 733 Ethiopian birr. Generally the entire variable
shows positive significance change over the period.

Over the period 1995 to 2003 economic growth increase on average by 4.16% .Where the
population growth rate was about 2.88% on average for the given consecutive nine year.
The population growth rate has not shown great variation each year. More or less the
annual growth rate for each year was nearly the same. The maximum growth rate of the
population has been recorded in 1996. However the per capital income growth has shown
a great fluctuation. The maximum per capital income has been recorded in the year 1999,
by 6.65%.While minimum per capital income growth rate has been seen in the year 1998
(it has decrease by 12.42%)This variation resulted from variation between total
population and GDP. The average annual growth rate was 1.31% for that period (1995-
2003). This figure tells us additional effort in need to increase regional GDP and decrease at
least to stay as it is the population. As it described before, the (Amhara region) productive
age group is about 53.52 percent. Therefore the economic growth which explained in table
4 was produced by this 53.52 percent of productive population

Table 3 Estimation of population size and Growth rate of Ethiopia between (1900-2000)

Year Population in Annual growth rate Doubling period(70

millions % growth rate)
1900 11.8 0.2 346
1910 12.1 0.5 139

1920 12.9 1.0 69

1940 16.2 1.5 46
1960 23.5 2.2 32
1980 37.7 2.8 25
1990 51.2 3.0 24
1993 53.4 3.1 23
1996 60 3.2 22
2000 63.4 2.92 24

Source census population” between “(Ethiopian stastical agency, 1900-2000)

Table 3 illustrates that the growth rate of Ethiopian population was 0.22 at the run the 20th
century with a doubling time rate of 346 years. In middle of the 20 th century the growth
rate reside to 2% while the doubling time come to 35 year

This figure rose to 2.9% at the end of the century with a doubling time of year. This
dramatizes growth rate is attributed to: A sharp increase infertility rate and Adeline in
mortality rate.

Furthermore current tends of population growth rates in Ethiopia shows in that this rapid
population growth will continue for a while due to the population momentum It is
projected (estimated) calculated based on the existed growth rate that Ethiopian
population size will reach a level of 112 000000 in 2015 with a doubling time 24 years.

3.2 Growth rates in real GDP and Populations

In the least developing country in general and our country in particular more population means
more consumption even though more population is a significant to provide surplus labor force
which helps the country in order to bring good economic growth. This is because of more
population is put burden on the level of national saving and investment which were a good pillar of
for RGDP growth of one country.

Table -3.2Growth rate in RGD and population

RGDP at fixed
basic price in RGDP growth Total population Population
Year
1993/4 (in rate (%) (in millions) Growth rate (%)
million birr)
1993/4 30931.5 2.5 53.1 2.6

1994/5 34788.2 3.2 54.5 2.51

1995/6 39087.9 3.6 55.2 2.4

1996/7 43919 4.1 56.1 2.36

1997/8 49347.2 4.8 57 2.34

1998/9 55446.3 5.1 58.9 2.32

1999/00 62299.2 5.9 60 2.3

2000/01 66920.7 7.4 61.6 2.7

2001/02 68014.2 1.6 63.2 2.73

2002/03 66586.9 -2.1 64.8 2.75

2003/04 74397.4 11.7 66.5 2.8

2004/05 83804 12.6 68.3 3

2005/06 93474.5 11.1 70 2.9

2006/07 104499.7 11.8 72.4 2.52

2007/08 116178.6 11.2 74.9 2.48

2008/09 127737.5 9.9 76.9 2.46

2009/10 141187.7 10.4 79.4 2.44

Source: NBE- 2011

As indicated in the above table the RGDP growth rate increases first from 2.5 in 1993/4 to 7.4 in
2000/01. But declines on wards up to the year 2002/03. The RGDP growth rate also increase from
2002/03 up to the year 2004/05. However, declines on wards in some extent up to the year
2008/09. This increasing and decreasing in the growth rate of RGDP shows the trends of RGDP
growth rate fluctuate from year to year. The year 2002/03 was the lowest RGDP growth rate of the
country. since its growth rate become declined by 2.1 percent.
 This year also known as negative growth rate. This is due to severe drought and high population
growth rate prevailed in this year. Finally, from the table the population growth rates in the first
seven period decreases up to the year 1999/00. But raises on wards and reached peak at 2004/05
of 3%. However after four period year shows slight reduction this is due to increases in the use of
birth control in both urban and rural areas such as, family planning, contraceptive use, increase in
education and soon. Generally, we conclude the above table the trends of growth rate in RGDP
relatively fluctuate than the trends of growth rate in population.

3.2.1 The relationship between growth rate in RGDP and population

As it can seen in table 3.2 the RGDP growth rate and population growth rate has no simple
relationship. If we separate the data in to 7,5,4, 3 and 2 periods we can see their relationship clearly
although this relation is not continues.

For instant, for the period between 1993/4 and 1999/00 the relation between RGDP growth rate
and population growth rate was negative. This is because growth rate in RGDP increases while
population growth decreases.

For the period between 2002/03 and 2004/05 the relation between RGDP growth rate and
population growth rate was positive. because growth rate in RGDP increasesWhile growth rate in
population increases. for the period between 2004/05 and 2005/06 the relation also positive.

For the period between 2005/06 and 2006/07 the relation between RGDP growth rate and
population growth rate was negative. Because the RGDP growth rate increases while population
growth rate decreases.

For the period between 2006/07 and 2008/09 the relation was positive but negative for the period
between 2008/09/ and 2009/10.

Table “a” percentage of economically active population (Age 15-65) by educational attainment.

Year Permian level % Secondary level (in Tertiraly level ( in percent

 percent % %
1975 4.27% 1.92% 0.13%
1980 5.73% 3.10% 0.21%
1985 7.18% 4.64% 0.23%
1990 9.11% 6.78% 0.47%
1995 11.03% 8.96% 0.66%
2000 12.79% 9.89% 0.99%
2005 13.28% 12.36% 1.26%
2012 13.88% 14.99% 1.54%

Sources: world Bank (2010). Data base

According to world bank (2010). Data, only 4.27% , 1.92% and 0.13% of the economically a
active population was attend primary level, secondary level, Tertiary level of education
respectively in 1975. After fourteen year the percentage of person who reach the primary,
secondary level and Teritary level education have increase to 13.88%, 14.99% and 1.54%
respectively. This indicates as still the majority of Ethiopian economically active population did
not attendly even the primary level education. Especially the proportion of economically active
population who attended tertiary level has remained below one percent will the year 2000 from
see detail information the above table.

CHAPTER –FOUR
 CONCLUSIONS AND RECOMMENDATION

4.1. Conclusion

This study assesses the relation between population growth and Economic growth which
is the objectives every society is achieved with the efficient using of these existing
resources and proving amount put ( GDP) by using economics of scale in appropriate
manner.

The current trends of population growth will continue for, while due to the population
moment.

The projected (estimate) calculated based on existed growth rate that Ethiopian population
size will reach a level of 12 million in the year 2015 doubling time 24 year.

From this study over the period 1995 up to 2003 Economic growth average of 4.16%
while population growth rate was about 2.85% average for the given consecutive 9 year.

4.2. Recommendation

According to this paper policy maker should favor low population growth policy and
government create should be provide adequate family planning services and create a
awareness about the Negative consequence of rapid population growth to promote
counters economic growth. This line with over all message of researchers is the main
prevent methods of Ethiopian Rapid population growth is increase economic growth.

In our view economic growth means an increasing real GDP. There is an increase of real
GDP mean theories an increasing in the value of nation output /national expenditure and
other benefits of economic growth include.

Higher income these enable consumer enjoys more goods and services and enjoys better
standard of living.

Lower UN employment with higher output firm tends to employ more workers creating
more employment.
Lower government borrowing economic growth creates higher tax revenue and there is
less need to speed money on benefits. Such as unemployment’s benefit, there for economic
growth also plays aroceir reducing debt to GDP ratio.

Improved public serve. This increase tax revenue the government can spend on NHS
(national health services) and education etc.

Money can be spent on protecting the environment, with higher real GDP a society can
devote more resource to promoting recycling and use of rentable resources.

Investment and there for encourages a virtuous cycle of economic growth.

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