The New Zealand Institute of Economic Research has just released a report entitled “Grow for it”, which argues that, rather than being worried about increasing population levels, New Zealand should aim to increase its population to 15 million in the next 50 years.  It is interesting that such a report is arguing that higher migration and higher fertility is beneficial - given that all we ever seem to hear is that we should have less children and become smaller for the ‘good of all’ these days. According to the report a bigger population would help New Zealand offset the “looming fiscal challenges of an ageing population” with better economies of scale.  The best way to do this is through migration which will directly increase the working age population.  Makes sense. At the moment New Zealand is destined to stay small.  Birth rates will decline as a greater proportion of people fall outside child-bearing age and at the moment as many people leave the country as migrate. The advantages of an increased population listed by the report include:

1. Increasing returns to investment in physical and institutional infrastructure -Think of large firms who have a cost advantage over smaller firms in regard to high fixed cost.
2. Specialisation and the higher productivity which results is a function of market size.
3. Higher wages observed in larger cities where capital to labour ratios tend to be higher.
4. Improved efficiency and effectiveness of knowledge exchange through so-called “network” or “agglomeration” effects gained from having people and firms located near each other.
5. Job search is easier in more populous places.  
6. Home market effect: Stronger competitive pressure in larger markets. Competition leads firms to innovate continuously as competitors are able to imitate. This provides a platform for competing internationally, where the scale is larger still and competition potentially strongest.