Economic Development

Topics: Economic development, Economics, Economy Pages: 11 (3775 words) Published: September 19, 2013


Pasa Ugyel
100766, 5th semester
Population Studies, PS 352
Leishipem Khamrang

Population growth has a substantial impact on economic development. There are two schools of thought regarding this issue. One school of economic thought maintains that population has a negative impact on economic development while other emphatically favours its positive effects on economic development. This paper aims to analyze a long run relationship between population growth and economic development in Bhutan. The findings of this paper indicate the existence of a long run equilibrium relationship between population growth and economic development in Bhutan. These findings show that there exists a unidirectional causality from population growth to economic development in Bhutan. This means that population growth in Bhutan has a positive impact on the country’s economic performance. These findings corroborate the population oriented economic growth hypothesis which states that population growth promotes economic development. OBJECTIVE

1. This paper is focused on answering the fundamental question “Are the effects of population growth on economic growth in Bhutan positive or negative?” 2. This paper also tries to find out remedies to make this country self –reliant in all spheres of the economy.

It seems obvious that more rapidly growing populations have fewer natural resources per person, less physical capital per worker, more dependents, and greater needs for new social infrastructure. Perceptibly, they must be accounted as economically worse off. These intuitions shaped the earlier studies of population and economic development such as Coale and Hoover model (1958). Later studies developed more neoclassical versions of these ideas, featuring that more rapid population growth led to per capita income. Noble prize economist Kuznets (1956), as well as Boserup (1956, 1981) and Simon (1981) suggested many possible positive effects of population growth, including economies of scale, acceleration of technological progress, flexible market response to emerging shortages , induces institutional changes , cheaper communication and transportation, and easier collective social investments. Kuznets examined per capita income growth and population growth rates across nations and found positive correlation, which seemed inconsistent with Koale – Hoover view. Their study was replicate by many others. In another advance, human capital was explicitly incorporated in growth model, and cross – national empirical analysis in the convergence framework indicated larger positive effects of population growth (Mankiw, Romer and W2EIL 1994). As Dawson and Tiffin (1998, p.149) put it that “ the relationship between population growth and the economic development has long been thought to be fundamental to our understanding of less developed countries . Indeed most text book on economic development includes a section of population and development.” However there is no consensus whether population growth is beneficial or detrimental in the economic growth in the developing countries. As Thirwall (1994, p.143) commented “the relationship between population growth and economic development is a complex one and the historical evidence is ambiguous particularly concerning what is the cause what is the effect.” It is traditionally seen that the people of Bhutan are, by virtue of the circumstances of their habitat and precipice terrain, subjected to serious handicaps and constrained to scratch the earth for rather squalid and miserable living. The general impression in the minds of Bhutanese and foreigners alike who visit the nation is one of total abandonment and salutary neglect of the people. For most of the people of rural area, electricity, portable water supply, clinic, health centers and hospital which are by and large concentrated in the alleged urban...
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