On the other hand, higher population density contributes positively to trade because these countries are unable to satisfy their need for primary products from domestic sources alone. They are forced, therefore, to specialize in the production of manufactured goods, exchanging these for primary product imports. In the long run, this turns out to be highly beneficial, the results suggest, since countries that depend more on natural resources for exports tend to grow less rapidly than those which base their exports on industrial goods. The mechanisms by which such gains are realized are not well understood. They may relate to exploitation of economies of scale, to greater competition, or to an increase in the learning effects associated with larger size.
More research is required here.
Although the donors hardly want to advocate expanding population in order to take advantage of these favorable effects, this research might lead to a better understanding of the barriers that national boundaries create to economic growth, and how these can be overcome. Poverty alleviation appears to be negatively correlated with population density, which is an indicator of pressure on the natural resource base. On the other hand, urbanization contributes positively to poverty alleviation, probably because it facilitates access to social services. Most important, however, is the very positive contribution that both initial level and growth of per capita GDP make to poverty reduction. The coefficients of these variables are highly significant in all specifications of the poverty reduction equation.