Variety, Competition, and Population in Economic Growth: Theory and Empirics

Abstract

We provide aggregate macroeconomic evidence on how, in the long-run, a diverse degree of complexity in production may affect not only the rate of economic growth, but also the correlation between the latter, population growth and the monopolistic (intermediate) markups. For a sample of OECD countries, we find that the impact of population change on economic growth is slightly positive. According to our theoretical model, this implies that the losses due to more complexity in production are lower than the corresponding specialization gains. Using a Finite Mixture Model, we also classify the countries in the sample and verify for each cluster the impact that the population growth rate and the intermediate sector's markups exert on the 5-year average real GDP growth rate.

Keywords: Economic growth; Population growth; Variety-expansion; Specialization; Complexity; Product market competition.

JEL Classification: O3, O4, J1