The relationship between population growth and economic growth in Mexico

The relationship between population growth and economic growth is of great interest both for demographers and for development economists. Considering the case of Mexico, the objective of this study was to analyze the dynamic relationship between population growth and economic growth, through a structural break cointegration analysis for the period 1960-2014. The Gregory-Hansen cointegration test confirmed the existence of a long run equilibrium relationship between population and economic growth in Mexico. Based on the results of this test, we used 1985 as the year in which the structural break occurs in the cointegrating equation and therefore we included a dummy variable for this year in the VECM developed in the paper. In the short run, it was found that economic growth has a negative effect on population growth. In the long run, it was found that population has a positive effect on per capita GDP and that per capita GDP positively affects population. Additionally, a Granger causality test indicated that per capita GDP is Granger-caused by population and population is Granger-caused by per capita GDP, thus revealing the presence of a mutually reinforcing relationship between these two variables. In sum, the results found in this study suggest the existence of a bi-directional causality between population growth and economic growth in Mexico.