Generating the Wealth of Nations 36: Population Density and Economic Growth

For a couple of the things we did during the course, and that I looked at because I was interested, I was looking at data that seemed to suggest that countries with larger initial population densities had higher subsequent growth rates.  There are a number of good reasons to suspect that this might be true; in countries with higher densities, the costs of providing some publich services (like education and health care) and the costs of building and maintaining a transportation system, and the costs of recruiting workers, will all probably be lower.  So I decided to look at it systemattically.  I took all the countries in the Madison Project for which I had both 1950 and 2007 (I stopped before the Great Global Recession) real GDP per captia data and for which I could find both 1950 and 2007 population data and area data.  I then calculated the population density in 1950 and the total percentage growth in real GDP per capita from 1950 to 2007.  The I plotted the data, and I got this:

(Click to enlarge.)

The red line is a linear trend line (as calculated by Excel), which suggests that countries with higher population densities in 1950 also grew faster.  (The correlation coefficient between density and growth is 30.5%, and it's significant at the 1% level, for those of you deeply into statistics.)  Now this does not prove that density causes growth, but it's surely suggestive that it might.

(This is probably my last post related to the Generating the Wealth of Nations course; I hope some of this has been of interest.)