Document Type : Research Paper
Authors
1 Associate Professor of Economics, Department of Energy Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran
2 PhD student in Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran
3 MA in Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran
Abstract
Economic welfare, as a key indicator of development, plays a vital role in improving living standards and the economic sustainability of countries. One of the factors influencing economic welfare is the size and growth of the population. Therefore, understanding the impact of population growth on economic welfare is crucial for informing policy decisions. To this end, the present study aims to investigate the effect of population growth on economic welfare in Iran during the period of 1971 to 2023, using two autoregressive distributed lag (ARDL) models, symmetric and asymmetric (NARDL). The results of the first (symmetric) model show that population growth has a negative effect on economic welfare in both the short and long term. The results also indicate that per capita income, economic growth, and government size have a positive and significant effect on economic welfare. The inflation rate also has a negative and significant effect on welfare, while the unemployment rate has no significant effect. The results of the second (asymmetric) model also show that an increase in population growth (positive shocks) negatively impacts economic welfare, while a decrease in population growth (negative shocks) has no significant effect. The other results also indicate that per capita income, economic growth, and government size have a positive and significant effect on economic welfare. The inflation rate also has a negative and significant effect on welfare, but the unemployment rate does not have a significant effect on economic welfare. According to the findings of this study, adopting policies based on controlling and regulating the level of population growth, along with effective policies in managing inflation and strengthening production, can play an important role in increasing economic welfare and achieving sustainable development in the country.
Introduction
Economic welfare is an important indicator of development and quality of life, and achieving a desirable level of it is the goal of development policies. Researchers examine factors such as economic policies, institutional structures, technology, inflation, economic fluctuations, and population growth. Population growth can have a positive or negative impact on this indicator. In recent decades, the relationship between population growth and economic welfare has gained importance, particularly in developing countries like Iran. Population growth may increase the need for public services, education, and health, but it puts pressure on resources and infrastructure, which affects welfare. A gradual decrease in population facilitates sustainable development, but its decline leads to population aging and economic, social, health, and cultural problems. At the macro level, population decline increases welfare and retirement costs, reduces the labor force, and decreases productivity. Also, a decline in population growth leads to a decrease in savings and slows economic growth. As a result, population balance and understanding its long-term relationship with welfare is important for policymaking. In recent decades, Iran has faced sanctions, exchange rate fluctuations and inflation, reduced trade, increased inflationary expectations, a shortage of supply expenditures, and a decline in purchasing power, which has made the economy challenging. Changes in government revenue cause exchange rate and GDP fluctuations and financial shocks, affecting prices and inflation. Studies in developing countries show differences in the relationship between population growth and welfare; some show a negative relationship and some show complex relationships. Piketty suggests that if population growth and per capita production were independent, higher population growth would contribute to economic growth. However, if it affects per capita growth, a high rate of population growth can affect growth and inflation, and new methods of analysis have made these relationships possible. This article uses a composite index of economic welfare in Iran for the first time, which provides a more comprehensive analysis. The effect of the population growth rate on Iran's welfare in the period 1350-1402 (1971-2023) has been investigated using autoregressive methods, both long-term and short-term. The findings emphasize the importance of population and economic policies for sustainable development and can guide policymakers in developing long-term strategies to facilitate development and improve the quality of life.
Research Question(s)
Does population growth affect economic welfare in Iran?
Does population growth have a positive effect on economic welfare, or a negative effect?
Does population growth have an asymmetric effect on economic welfare?
Methods and Material
In this research, the Composite Index of Wellbeing (IEWB) is used to assess economic welfare, which considers the dimensions of effective consumption, wealth stock accumulation, income inequality, and economic insecurity, with the weight of each dimension varying based on observations. Its general form is as follows: IEWB=CF+WS+ID+ES. The welfare index has been calculated for the period 1350-1402 (Iranian calendar) using the aforementioned method. The aim of the study is to investigate the impact of population growth on welfare, using ARDL and NARDL models, which allow for the analysis of short-term and long-term relationships and the asymmetric effects of shocks. NARDL allows for the separation of positive and negative effects of variables; therefore, the impact of increasing and decreasing population growth rates on welfare is examined separately. The following specifies the unrestricted Autoregressive Distributed Lag (ARDL) model:
In the second model, based on the autoregressive distributed lag (ARDL) method with asymmetric lags (NARDL), it is specified in the following equation:
Results and Discussion
Before estimating the model, the stationarity of the variables was examined using the Augmented Dickey-Fuller and Phillips-Perron tests. The results indicate that only economic growth is stationary at the level; the other variables become stationary after first differencing. Accordingly, linear and nonlinear autoregressive models can be used. Diagnostic tests show that the hypotheses of no autocorrelation, normality, homoscedasticity, and homogeneity of variance are not rejected. The bounds test also confirms the existence of a long-run relationship between the variables with 90% confidence; therefore, the null hypothesis of no long-run relationship is rejected. In the autoregressive distributed lag model, the optimal lag was selected based on the Schwarz-Bayesian information criterion (minimum of 3). The estimation results indicate that population growth has a negative effect, and per capita income has a positive effect on welfare. Inflation has a negative effect, and economic growth has a positive effect, as does the size of government. The unemployment rate has no significant effect, and the sanctions variable has a negative effect, such that welfare has decreased during this period. The error correction coefficient is significant and indicates that approximately 64% of the welfare deviation is corrected in each period. The long-run results indicate that population growth with a negative coefficient has an inverse relationship with welfare, and per capita income with a positive coefficient improves welfare. Inflation with a negative coefficient has a negative effect on welfare, and economic growth with 0.27 has a positive effect, increasing the level of welfare. The size of government has a positive effect in the long run, and the unemployment rate has no significant impact.
Also, in the second model, the optimal lag was selected as 3 based on the Schwarz-Bayesian criterion in the minimum state. The results show that an increase in population growth has a negative impact on welfare; a decrease in growth has no significant effect, which indicates asymmetric behavior in its impact. Per capita income has a positive effect, inflation has a negative effect, and economic growth has a positive effect. The effect of government size is positive in the short term, but the unemployment rate has no significant effect. The post-JCPOA (Joint Comprehensive Plan of Action) impact is negative, and welfare has decreased by about 14 units in the period 1396-1402 (Iranian calendar). The error correction coefficient is significant and shows that 60% of the welfare deviation is adjusted each year. In the long run, increasing population growth reduces welfare. Population decline has no significant effect. Per capita income has a positive effect on welfare. Inflation has a negative long-term effect, economic growth has a positive effect, and government size also has a positive effect, but the unemployment rate has no significant effect.
Conclusion
Population growth is a significant factor in economic and social dynamics, influencing age structure, migration, inequality, the labor market, and production capacity. Malthus (1798) believed that rapid population growth would lead to reduced welfare and poverty in the long run because increased income for the poor would lead to population growth and decreased productivity. Recent research, such as Peterson (2017), has shown that population growth in low-income countries, especially with high fertility rates, has negative consequences, while decreased mortality has more positive effects. The results of this study, using linear and non-linear autoregressive models, indicate that the average economic welfare in Iran during 1350-1402 (1971-2023) is about 44.26 percent. Welfare had an upward trend in the 1350s (1970s) but fluctuated later, reaching 62.62 percent during the Fifth Development Plan and decreasing from 1399 to 1402 (2020-2023), coinciding with the post-JCPOA sanctions. The NARDL model shows that population growth negatively impacts welfare, but a decrease in population growth has a positive, though insignificant, effect. Without sufficient infrastructure, uncontrolled population growth puts pressure on resources and reduces welfare. Long-term inflation has a strong negative effect on welfare, while economic growth and per capita income improve the situation, according to the growth and Friedman's permanent income theories. Government size also has a positive effect, indicating the government's role in services and welfare. The unemployment rate does not have a significant effect, perhaps due to structural or support reasons. The results suggest that population policymaking in Iran should be done carefully and based on economic and social capabilities. Population growth can contribute to economic growth in some circumstances, but without the necessary infrastructure, it can negatively affect welfare. Policies should aim for an optimal growth rate. The experience of economically successful countries shows that combining population policies with economic policies such as subsidies and tax exemptions provides a balance between growth and welfare. Future research should focus on determining the optimal point of population growth and examining its complex relationship with welfare in the country's institutional structure. Also, studying the difference in the optimal rate in different regions can design effective regional policies and be an important tool for policymakers in areas such as family, education, and employment.
Keywords
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