Examining effects of changes in population density on economic growth in Kenya

Abstract

Population density plays a great role for economic activities. Population densities are ignored as economic variables in analysis as countries that have same macroeconomic variables but differences in population densities are categorized similar. Population densities contribute greatly in gathering societies particularly those which have reliance on natural resources and farming. This paper explores how changes in population density affect economic growth in Kenya. Also, the study examines how changes in working age and dependent population influence economic growth in Kenya. The study utilizes time series secondary data obtained from Penn World table 9.1 and World Bank Development Indicators for the period 1981 to 2017 and employs ARDL bounds procedure. The findings indicate that: (i) population density growth has a significant positive impact on economic growth. (ii) Working age population growth has a significant negative impact on economic growth. (iii) Dependent population growth has a positive impact on economic growth. The results suggest that policies geared towards improving technological and physical infrastructure, reducing unit transport costs and creating competition among producers in Kenya should be encouraged. Efforts should be put also to enhance creation of decent and adequate job opportunities to absorb and utilize the working population. Collaboration and support on the job and need based training should be enhanced to mitigate on mismatch between workforce skills and new employment opportunities. Lastly, the retirement age for the productive working age should be extended as they contribute positively to economic growth.