Why Does Population Affect Economic Growth

Population may be considered positive hindrance in the way of economic development of a country.

In a 'capital poor ' and technologically backward country, growth of population reduces output by lowering the per capita availability of capital.

Population can be a limiting factor for economic growth because of the following reasons:

• Population Reduces the Rate of Capital Formation:

In underdeveloped countries, the compostion of population is determined to increase capital formation. Due to higher birth rate and low expectation of life in these countries ,the percentage of dependents is very high. Nearly 40% to 50% of population is in the non productive age group which simply consumes and does not produce anything.

In underdeveloped countries, rapid growth of population

• It reduces per Capita Availability of of Capital:

The large size of population also reduces per capita in less developed countries. This is true in respect of underdeveloped countries where capital is scarce and its supply is inelastic. Arapidly growing population leads to a progressive decline in availability of capital per worker. This further leads to lower productivity and diminishing returns.

• Adverse Effect on per capital Income:

Rapid growth of population directly effects per capita income in an economy. As long as the rate of population growth is lower than the per capita income, rate of economic growth will rise but if population growth exceeds the rate of economic growth, usually found in the case of less developed countries , per capita income must fall.

• Unemployment:

A fast growth in population means a large number of persons coming to the labour market for whom it may not be possible to provide employment. In underdeveloped countries the number of job seekers is expanding so fast that despite all efforts towards planned development, it is not been possible to provide employment to all.

Unemployment , underemployment and disguised employment are common features in these