Impact of Population Growth on Economic Growth of Tanzania

Abstract

This study investigates the impact of population growth on economic growth of Tanzania using granger causality and cointegration. Time series data for the period of 1991 to 2019 were used to validate the findings on granger causality and cointegration. Data were obtained from the World Bank, and were processed using Stata software. Vector Error Correction Model (VECM) was applied to examine the long run and short run causality. Gross Domestic Product growth rate (GDP) was used as a proxy for economic growth. The study is of interest that population in Tanzania has been rising steadily, however the same could not be asserted on economic growth as the economy maintained a cyclical growth, therefore pronouncements that economic growth prospects in Tanzania is a result of its growing population has been a challenge. Furthermore, no any researcher from Tanzania have used time series data with causality approach to find out the impact of population growth on economic growth. The study reveals that there is cointegration between population growth, inflation and economic growth given the time period. Moreover, VECM model shows that there is a long run causality running from population growth and inflation to economic growth and also there is short run causality (unidirectional causality) running from population growth and inflation to economic growth. Based on the findings the study recommends that the government should encourage population growth with caution. They have to make sure that the population is well educated to equip them with capability to engage into economic activities through consumption, investment, employment opportunities and exploitation of resources wisely. Furthermore, the government should carefully design a population growth strategy combined with institutional and policy changes to ensure population growth becomes beneficial to the country. On top of that, the government should also ensure that the economy is growing at a higher rate than the growth of population. This will ensure that the increased demand for goods and services generated by population growth is met.