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Demographic Transition and Economic Growth in Paki
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Shahzad Hussain
Corresponding Author Department of Economics
Bahauddin Zakariya University, Multan, Pakistan
E-mail: shahzadhussain@windowslive.com
Tel: + 92 (0) 61 9210052, 54; Fax: + 92 (0) 61 9210098
Shahnawaz Malik
Department of Economics, Bahauddin Zakariya University
Multan, Pakistan
Tel: + 92 (0) 61 9210052, 54; Fax: + 92 (0) 61 9210098
Abstract
I. Introduction
It is one of the uncontroversial debates that economic growth and development objectives can not be
achieved without improving skills, energies and potentials of the people. It matters a lot in
development process that the people of a country young or old, living alone or in extended families,
how do population changes? Will the population be productive in future or not? It can be said that
objectives of the development of any country are in the hands of its people.
The understanding of the demographic changes has great importance in development era
because it provides a powerful predictive tool through which the trends of future can be viewed easily.
Demographic changes provide beneficial conditions for development, offering a country the chance to
Demographic Transition and Economic Growth in Pakistan 492
set out on a path of rapid growth (Bloom et al, 2001). Demographic changes also provide best
understandings about the challenges of future. Demography can help the policy makers to set their
priorities for future planning and to create a policy environment that takes maximum advantages of
demographic potential of the country.
This paper has main objective to empirically examine the impact of demographic variables on
economic growth of the Pakistan economy for the period 1972-2006. The rest of the paper is structured
as follows. Next section has brief explanation of demography and economic growth in Pakistan.
Related work has been reviewed in section III. Section IV deals with Data and Methodology. Results
of the estimations are reported and discussed in section V. Final section has concluding remarks with
some policy suggestions.
6
Total Fertlity Rate
5
3
75 80 85 90 95 00 05
Years
Sources: Pakistan Demographic Survey (various issues)
Pakistan Economic Survey (various issues)
diarrhea and Pneumonia. The other reasons for the slow decline in Mortality in Pakistan are perhaps
the Phenomenon of repeated pregnancies and births, which is closely connected with the health and
mortality rate of infants, children and mothers. The decline in Infant mortality has been slowed when
compared with other South Asian countries.
130
120
110
90
80
70
75 80 85 90 95 00 05
Years
Sources: Pakistan demographic survey
Population Growth Survey (PGS)
Pakistan Economic Survey (various issues)
United Nations Statistical Division
World Population Prospects: The 2004 Revision.
Dataset on CD-ROM. New York: United Nations
5
Growth Rate of
Labor Force 4
0
1975 1980 1985 1990 1995 2000 2005
Years
Source: Pakistan Economic Survey (various issues)
Economic Growth in Pakistan
Pakistan has experienced a fluctuated economic growth. In the early 1970,s there is a
downward trend in the economic growth of Pakistan due to political instability and aftereffects of 1971
war. Then Pakistan experienced a respectable growth rate in the late 1970,s and till 1988, due to
consistent economic policies and afghan War. After 1988 again there is a declining trend in GDP
growth rate, which is due to political instability, inconsistent economic policies of political
governments and the preference of personal political interests over national interest. After 2000 there is
a increasing trend in GDP Growth Rate.
495 Shahzad Hussain, Shahnawaz Malik and Muhammad Khizar Hayat
Figure 4: Trends in GDP Growth Rate in Pakistan (1972-2005)
10
6
GDP
Growth Rate
4
0
75 80 85 90 95 00 05
Years
Source: State Bank of Pakistan
Kelley and Schmidt using panel data of three growth periods (1960-1970, 1970-1980, 1980-
1990) of 89 countries (with populations exceeding 1 million in 1960) has shown that the rate of
population growth does not appear to have a notable impact on per capita output growth at least in the
1960s and 1970s.
Climent and Meneu (2003) investigated the relationships between demographic and economic
variables for Spanish economy for the period 1960-2000. Bivariate Granger Causality has been
examined to look short run relations. The results from the multivariate causality analysis and the
Generalized Impulse-Response Function show that total fertility responds directly to GDP and Infant
Mortality does not cause total fertility.
Alam, Ahmed and Butt (2003) analysed the dynamics among fertility, family planning
programmes and female education for Pakistan over the period 1965-1998. the results are found to be
consistent with theoretical statements that maintain that although in the long run the sufficient
condition for fertility decline may be the result of complex dynamic interaction with planned family
planning and significant socio-economic structural changes.
V. Empirical Results
Augmented Dickey-Fuller test has performed to test the unit root hypothesis to all variables. The
results are reported in table 2 and 3. According to the results, all variables are not integrated of same
order. GDPG and GL are stationary time series at level when checked with intercept and with trend and
intercept. All other variables, IMR, TFR, WR and PG are integrated of order one i.e. I (1) when
checked with intercept and with trend and intercept both.
497 Shahzad Hussain, Shahnawaz Malik and Muhammad Khizar Hayat
Table 2: Augmented Dickey-Fuller Test with Intercept
OLS methodology has been used to check the impact of demographic variables on economic
growth. Results of estimations are reported in table 4. IMR is significantly related with economic
growth. The evidence suggests that reduction in mortality will foster economic growth. TFR has also
significant and negative impact on GDP growth rate. As the rate of fertility continues to fall, there will
be increased opportunities for economic growth. WR is positively and significantly related with
GDPG. Increase in wage rate will be resulted an increase in economic growth. GL is negatively related
with GDPG. It may be due to the fact that the economy is not absorbing the working age population
into productive employment. PG is positively related with GDPG and significant at 5% level.
Moreover, the model is good fit as indicated by the value of F-statistics. The value of R-square implies
that about 40% of the total variation in GDPG is explained by the demographic variables included in
the model. In addition, the problem of autocorrelation has been removed by using Auto Regressive
Moving Average (2, 2).
Demographic transition can have significant effect on the growth of the economy of the
country. Health status of the country prompts the demographic transition but its maintaining is more
important. It is one of the most important keys to success because societies with better health status are
more likely to prosper. It is also fact that healthier and long-lived populations are more productive, lose
fewer working days, have better incentives to invest in human capital. Reduction in the mortality rate
of the children is proper indicator of the health status of the country. Reducing fertility will enrich the
quality of human capital and change the demographic situation of the country. Increase in wage rate
has good effect on the economy and on the lower population group. A growing proportion of people of
working age will have positive effect on the economy only if they can absorbed into productive
employment. The proper utilization of healthy and educated work force is an engine for economic
growth. Absorbing a large part of population into productive workforce is great challenge for a
developing country especially with challenging unemployment problem and with economy in
recession. So, the challenges of demography have great effect on the society. Changes to family
structure, the way people work and status of children and women will have great and immediate
impacts on the lives of the people.
Demographic Transition and Economic Growth in Pakistan 498
Table 4: Estimation Results Dependent Variable: GDPG Sample: 1972-2005
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