Achieving a Demographic Dividend

Article excerpt

One of the goals of development policies is to create an environment for rapid economic growth. The economic successes of the "Asian Tigers" during the 1960s and 1970s

have led to a comprehensive way of thinking about how different sectors can work together to make this growth a reality. Referred to as the "demographic dividend," this framework helps explain the experience of certain countries in Asia, and later successes in Latin America, and is creating a sense of optimism for improving the economic well-being of developing countries, especially in subsanaran Africa.

The demographic dividend refers to the accelerated economic growth that begins with changes in the age structure of a country's population as it transitions from high to low birth and death rates. With fewer young people relative to the population of working-age adults, and with the successful implementation of key national policies over the long term, countries such as Thailand and Brazil have reaped many rewards from their demographic dividend.

But many policymakers mistakenly think that a demographic dividend results automatically from a large population of young people relative to the population of working-age adults and without the needed population, social, and economic policies. This is not the case.

Nations earning a demographic dividend have invested in human capital (health and education), implemented sound economic and governance policies, and sustained the political commitment necessary to make the most of the opportunity. Carrying out those policies can be challenging for a country's social and governance structures, and not all countries may be able to take advantage of a dividend.

This Population Bulletin explains the demographic dividend in terms of demographic changes, investments in human capital, and economic and governance policies. It highlights the experiences of Asian and Latin American countries in achieving their dividends and considers the prospects for African nations. The last section outlines issues that countries need to plan for as they move beyond their demographic dividend.

A Framework

As a country's total fertility rate (TFR, the average number of children per woman) drops, the proportion of the population under age 15 begins to decrease relative to the adult working-age population (generally ages 15 to 64 - the child dependency ratio). The decline in this ratio sets the stage for smaller families, who now have more resources to invest in the health, education, and well-being of each child. And with fewer people to support, a country has a window of opportunity for rapid economic growth if the right social and economic policies are developed and investments made. As long as the child dependency ratio continues to decrease, the window remains open. Eventually, however, people ages 65 and older begin to represent an increasingly larger proportion of the total population, signaling the end of the first demographic dividend.

From a demographic perspective, these changes in the population age structure characterize the time frame during which a dividend can take place. But changes in the population age structure do not guarantee accelerated economic growth - the dividend is not automatic and requires a set of investments and policy commitments (see figure).

CHANGING POPULATION STRUCTURE

As a first step, countries must go through a demographic transition - from high to low birth and death rates. Although most countries have made significant progress in reducing mortality, the countries that continue to experience sustained high levels of fertility are not poised for a demographic dividend. As long as fertility rates and resulting population growth rates remain high, the size of the child and adolescent population will be larger than the working-age adult population. In these circumstances, families and governments typically will not have the resources to invest in the health and well-being of children and be able to move toward a dividend. …

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