Population and economic growth in Mexico : regime dynamics and causality

The dynamic relationship between population and economic growth has not reached a consensus on whether it is positive, negative, or neutral. Using annual panel data for the 32 Mexican states over the period 1940-2020, this paper examines the joint dynamics of population growth and GDP per capita. In a first stage, the analysis applies regime dynamics and hierarchical cluster analysis to segment the sample into a set of Mexican states with similar trajectories. The empirical results of this first stage reveal four clusters. In the second stage, based on these internally homogeneous and clearly differentiated clusters, Granger, VAR and cointegration causality tests are carried out. The results confirm that population growth and income per capita have different causalities depending on the cluster and stage identified by a structural change, an event related to the effectiveness of the population policy to reduce fertility.