Luận văn thạc sĩ UEH demographic factors and economic growth, the bi directional causality in south

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DEMOGRAPHIC FACTORS

AND ECONOMIC GROWTH:

THE BI-DIRECTIONAL CAUSALITY

IN SOUTH EAST ASIA

BY

VO TAN THANH DIEP

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, November 2015

LUAN VAN CHAT LUONG download : add [email protected]

i

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DEMOGRAPHIC FACTORS

AND ECONOMIC GROWTH:

THE BI-DIRECTIONAL CAUSALITY

IN SOUTH EAST ASIA

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

VO TAN THANH DIEP

Academic Supervisor:

PROFESSOR NGUYEN TRONG HOAI

HO CHI MINH CITY, December 2015

LUAN VAN CHAT LUONG download : add [email protected]

ii

DECLARATION

“I certify the content of this dissertation has not already been submitted for any degree

and is not being currently submitted for any other degrees.

I certify that, to the best of my knowledge, any help received in preparing this

dissertation and all source used, have been acknowledged in this dissertation.”

Signature

Vo Tan Thanh Diep

Date:

LUAN VAN CHAT LUONG download : add [email protected]

iii

ACKNOWLEDGEMENT

Foremost, I would like to express my sincere gratitude to my supervisor, Professor

Nguyen Trong Hoai for his professional knowledge, perceptive guidance and for giving

me valuable opportunities. His guidance really helped me for the direction of the research

and writing of this thesis.

In addition my advisor, I would like acknowledge the love from my family to me over

the last 24 years. A special thank is to my parents for their support throughout my life, to

my sister and my relation in Ho Chi Minh City for valuable support during my studies.

Furthermore, I would also like to thank all lecturers and staff at the Vietnam

Netherlands Program and my VNP 20 classmates.

Most of all, a special thanks go to my better haft – Nguyen Son Kien - for the

motivation, encouragement and affectionate care that he bring to my life.

LUAN VAN CHAT LUONG download : add [email protected]

iv

ABSTRACT

This study has demonstrated new evidence sustaining the idea that variation in

demographic factors is an important determinant of growth in per capita income. Using an

annual panel dataset from 1990 to 2013 at the country-level in the Southeast Asia, this

study is conducted to analyze the following key areas in comparing with current literature.

First, the determination of the impact of a number of the demographic factors on the

economic growth by using a various aspect of demographic factors, including: population

growth, life expectancy, and age structure. Second, the interpretation of the bi-directional

causality among: (i) the population growth and the economic growth; and (ii) the life

expectancy and the economic growth. Furthermore, the two new econometric techniques,

Driscoll and Kraay estimation, and structural equation model, in parallel with the panel

regression technique are applied.

It is noticeable about the following key contribution, including: (i) the specification

of the various aspects of demographic factors on the economic growth is analyzed in the

new context (Southeast Asia) where most countries have experienced the demographic

transition, and have received the demographic dividend; and (ii) the worth analysis of the

bi-directional causality has been recognized since it is one of the first in its line of current

literature that confirms the inverse effect of the economic growth on population growth,

and life expectancy simultaneously.

Key words: Demographic transition, economic growth, population growth, life

expectancy, age structure, Southeast Asia, Panel data, SEM.

LUAN VAN CHAT LUONG download : add [email protected]

v

TABLE OF CONTENT

Declaration...................................................................................................................................... ii

Acknowledgement .........................................................................................................................iii

Abstract.......................................................................................................................................... iv

Table of content .............................................................................................................................. v

List of tables................................................................................................................................. viii

List of figures................................................................................................................................. ix

Chapter 1 Introduction .................................................................................................................... 1

1.1. Problem statement............................................................................................................ 1

1.2. Research objective............................................................................................................ 3

1.3. Research questions........................................................................................................... 3

1.4. Research scope ................................................................................................................. 3

1.5. Thesis structure ................................................................................................................ 3

Chapter 2 Literature review ............................................................................................................ 5

2.1. Theoretical literature ........................................................................................................ 5

2.1.1. Key concepts............................................................................................................. 5

2.1.1.1. Demographic factors.......................................................................................... 5

2.1.1.2. Demographic Transition .................................................................................... 6

2.1.2. Demographic factors and economic growth ............................................................. 8

2.1.2.1. The perspective of Malthusian Regime ............................................................. 8

2.1.2.2. The perspective of Post-Malthusian ................................................................ 10

2.1.2.3. The perspective of Modern Growth Regime ................................................... 11

2.1.3. Demographic transition and economic growth ....................................................... 13

2.1.3.1. The labor supply mechanism........................................................................... 13

2.1.3.2. The savings mechanism................................................................................... 14

2.1.3.3. The Human capital mechanism ....................................................................... 14

2.2. Empirical studies............................................................................................................ 15

2.2.1. Population growth and age structure....................................................................... 15

2.2.2. Life expectancy....................................................................................................... 18

2.2.3. Bi-directional causality ........................................................................................... 19

2.2.4. Determinants of economic growth, population growth, and life expectancy ......... 20

2.2.4.1. Economic growth............................................................................................. 20

2.2.4.2. Population growth............................................................................................ 21

2.2.4.3. Life expectancy................................................................................................ 21

LUAN VAN CHAT LUONG download : add [email protected]

vi

2.3. Hypothesis construction and conceptual framework ..................................................... 22

2.3.1. Hypothesis construction.......................................................................................... 22

2.3.1.1. Demographic factors and economic growth.................................................... 22

2.3.1.2. Two-way relationship ...................................................................................... 24

2.3.2. Conceptual framework............................................................................................ 25

Chapter 3 Research methodology ................................................................................................. 27

3.1. Data ................................................................................................................................ 27

3.2. Model specification........................................................................................................ 29

3.2.1. Model specification for one way effects................................................................. 29

3.2.2. Model specification for the bi-directional causality ............................................... 30

3.3. Research methodology ................................................................................................... 32

3.3.1. Models of panel data regression ............................................................................. 32

3.3.1.1. The model of Pooled regression ...................................................................... 32

3.3.1.2. The model of fixed effects estimation ............................................................. 32

3.3.1.3. The model of random effects estimation ......................................................... 34

3.3.1.4. Driscoll and Kraay standard errors and panel models..................................... 34

3.3.2. The structural equation model (SEM)..................................................................... 36

3.3.2.1. The causal effect and mediate mechanism ...................................................... 36

3.3.2.2. The simultaneous (non-recursive) structural equation model ......................... 37

3.3.2.3. The logic of SEM ............................................................................................ 39

Chapter 4: Empirical results.......................................................................................................... 40

4.1. Overviews of demographic transition in Southeast Asian ............................................. 40

4.2. Data description.............................................................................................................. 42

4.2.1. Descriptive statistic................................................................................................. 42

4.2.2. The possible relationship by scatter........................................................................ 44

4.2.3. Correlation .............................................................................................................. 45

4.2.4. Demographic factors by deciles.............................................................................. 46

4.3. Panel data regression...................................................................................................... 47

4.3.1. Diagnostic analysis ................................................................................................. 47

4.3.2. One-way direction - Driscoll and Kraay estimation ............................................... 49

4.4. The bi-directional causality estimation .......................................................................... 52

Chapter 5 Conclusions and policy implication ............................................................................. 56

5.1. Concluding remarks ....................................................................................................... 56

5.2. Policy implication .......................................................................................................... 58

LUAN VAN CHAT LUONG download : add [email protected]

vii

5.3. The limitation and directions for further research.......................................................... 61

Reference ...................................................................................................................................... 62

LUAN VAN CHAT LUONG download : add [email protected]