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Kuznets, Lewis, Meier and other economists have shown that the growth of population has been an important factor in the economic growth of developed countries in the following ways:
1. Increase in Per Capita Product:
Prof. Kuznets in his study Modern Economic Growth has pointed out that substantial rates of population growth in Europe have led to high rates of increase in total product and per capita product. The growth of total product and per capita product has been accompanied by the growth of national product.
The growth of national product, in turn, has been due to the enormous addition to population which has led to large increase in working labour force. Kuznets points out that “in modern times growth in population has been accompanied by growth in aggregate output for many countries so large that there was also a marked secular rise in per capita product.”
2. Rise in Labour Productivity:
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The rise in the rate of per capita product is the result of rise in labour productivity. It is improvements in the quality of labour which increases productivity per unit of labour.
This means a rise in the efficiency of labour which leads to greater output per unit of labour. Studies made by Schultz, Harbison, Kendrick, Solow and a host of other economists reveal that one of the important factors responsible for the rapid growth of the American economy has been the increase in labour productivity. According to Galbraith, a large part of America’s industrial growth has been from improvements brought about by improved men.
3. Population Growth leads to Growth of Physical Capital:
It has been proved by recent researches that the growth of physical capital stock depends to a considerable extent on human capital formation which is the “process of increasing knowledge, the skills and the capacities of all people of the country.” The spread of education, knowledge and know-how raise the level of skills and physical efficiency of the people and thus increase the productivity of physical capital. The latter, in turn, raises the national product.
4. Population Growth leads to Age of High Mass-Consumption:
Rostow has shown in his Stages of Economic Growth that during the “take-off stage” when the growth rate of population was high, the rate of net investment rose by 5-10 per cent of national income. This led to the development of “leading sectors” due to the increase in the effective demand for their products.
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This paved the way for the Age of High Mass-Consumption through which almost all developed countries are passing. Thus population growth leads to increase in the production of goods and ultimately to the extensive use (consumption) of automobiles, durable consumers’ goods and household gadgets.
(5) Population Growth as a Source of Capital Formation:
According to Nurkse and Lewis[, high population growth can be a source of capital formation in underdeveloped countries. Nurkse points out that underdeveloped countries suffer from disguised unemployment on a mass scale. This surplus labour force can be put to work on capital projects like irrigation, drainage, roads, railways, houses, etc. They can be supplied simple spare tools by farmers and food by their families.
In this way, surplus rural labour force can be a source of capital formation. On the other hand, Prof. Lewis suggests that economic development takes place when capital accumulates with the withdrawal of surplus labour from the rural sector and its employment in the industrial sector. Such workers are paid the subsistence wage rate which is less than the prevailing market wage rate. This leads to profits which are invested by capitalists for capital formation.