By Michael Reddell 09/04/2018

I noticed a few comments to another of my posts about possible links between population size and economic performance.

My working assumption is that, on average, across all countries, there isn’t any such relationship. Apart from anything else, if there were a positive relationship –  that was more than chance –  it would suggest that two countries merging would increase their respective real incomes.

And yet for at least the last 70 years, we’ve had steadily more countries emerging.  No doubt economics isn’t the only thing at work in those choices –  people might be willing to pay a price to be “free” and self-governing –  but it isn’t likely to be an irrelevant consideration either.

But what do the data show?   Here I’ve just used the IMF World Economic Outlook database data for 2016.

The first chart shows the relationship –  for the 193 countries/territories the IMF reports data for –  between real GDP per capita (in purchasing power parity terms) and population (each dot is one country).   The population term is expressed in logs.

As (I would have) expected, there is basically no relationship at all.   The simple linear regression line is actually slightly downward sloping, but that won’t pass any test of statistical significance.  Perhaps one could craft a story in which the top 10 countries (in terms of per capita income) all have quite small populations –  the biggest is around 5 million people – but since oil plays a big part in most of those individual cases even then one shouldn’t make too much of the point.

And here is the chart if we look only at the countries with populations from 0.5 million (a tenth of New Zealand’s) to 50 million (ten times New Zealand’s).  Since that is a much more compressed scale –  not everything from Tuvalu to the People’s Republic of China –  this time the population variable isn’t expressed in logs.

popn and real GDP pc 0.5 to 50m For those with sharp eyesight, New Zealand is a dot coloured orange.

Again, there really isn’t any sort of relationship.  Again, the simple regression line is downward sloping, but there are lots of countries with very small populations and very low per capita incomes.   But even within this more-compressed range of populations, there is no sign at all of any sort of upward sloping relationship –  the idea that, on average, a higher population will be associated with higher per capita incomes.

Of course, within each of these dots there are complex historical relationships, as to how population in any particular country came to be what it was (some about conquest, making big countries out of small one; sometimes the historical carrying capacity of the land; in some the role of slavery (eg forced depopulation from Africa), in others the role of immigration policy. Some locations offer better prospects than others and will, typically, have attracted or retained people accordingly.

But this post isn’t attempting to get into any of that. it is simply observing that at the most elementary level of numerical analysis there is no sign that countries with larger populations tend to be richer (whether as a matter of cause, or of effect).