Unveiling the Interlinkages Among Population Growth, Gross Capital Formation, Technological Progress, and Economic Growth in Tanzania

Seth Kenedi Mbwambo; Jumanne A. Setonga; Mpfubhusa F. Laurent

doi:10.37284/eajbe.8.1.3030

Seth Kenedi Mbwambo Moshi Co-operative University
Jumanne A. Setonga Mzumbe University
Mpfubhusa F. Laurent Mzumbe University

DOI: https://doi.org/10.37284/eajbe.8.1.3030

Keywords: Economic Growth, Gross Capital Formation, Population Growth, Technological Progress, Solow-Swan growth model, VECM, Tanzania

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Abstract

The drivers of economic growth in developing countries remain a subject of ongoing debate. While rapid population growth is sometimes seen as expanding the labour force and market size, it is also argued to strain resources and infrastructure. Meanwhile, capital accumulation and technological progress are widely recognised as key to sustainable growth. This study examines these dynamics in Tanzania using the Solow-Swan growth model and annual data from 1974 to 2023. Applying Johansen cointegration, Vector Error Correction Model (VECM), and Granger causality tests, the findings reveal that population growth negatively impacts economic growth (GDP) in the long run (-5.589, p < 0.01). In contrast, gross capital formation (1.092, p < 0.01) and technological progress (5.711, p < 0.01) significantly promote economic growth. The error correction term (–0.514, p < 0.01) indicates GDP adjusts toward long-run equilibrium at a speed of 51.4% annually. Granger causality tests reveal bidirectional causality between GDP and population growth, and unidirectional causality from capital formation and population growth to GDP. Although technological progress has a negative short-term effect (p < 0.1), its long-term impact is strongly positive (p<0.01), indicating transitional adjustments. The study confirms the relevance of the Solow-Swan model for Tanzania and underscores the importance of capital investment, technological innovation, and demographic management. These findings provide policy insights to foster sustainable growth by promoting productive investment, advancing technology, and managing population growth effectively in Tanzania and similar developing economies.

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