Theoretical and Empirical Analysis of Population and Technological Progress

Abstract

This chapter confirms the relationship between population growth and technological progress using theoretical and empirical studies. First, we look at some theories of technological progress in terms of population scale and growth. Many economists have asserted that a larger population induces more innovation, new technology, ideas, and so on. This view implies that the growth rate of technological progress declines as population decreases in Japan or other developed countries in the near future. Second, we devise a simple model to analyze the effect of population scale on technological progress. This model forms the basis of the empirical study discussed below. As for the implications of this model, the effect of population scale on technological progress is theoretically ambiguous. Since the conclusions depend on the assumption of the model, only an empirical study can confirm the implications of the model. In addition, according to the traditional Keynesian perspective, population numbers are an important factor in economic performance. In this view, a reduced population size leads to a decline in economic growth. This lower economic growth introduces the possibility of reduced investments in technology. Lastly, we test whether there is a positive relationship between population and technological progress using OECD panel data from 1985 to 2012 for 20 countries. We use the pooled regression and the random-effect models. From these empirical results, we derive a positive relationship between population growth and MFP using panel data analysis, thus supporting our assumption that the relationship between population growth and technological progress is positive.