Does Fertility Decline Stimulate Development?

Abstract

AbstractAs the fertility transition proceeds, women have fewer births which in turn leads to fewer young people in subsequent years. The resulting changes in the population age structure include an increase in the proportion of the population of working age. The first dividend from lower fertility refers to an acceleration of growth in GDP per capita as the proportion of the working-age population rises. The benefits can last for decades but are ultimately transitory. The second dividend follows the first and refers to a rise in savings and investment in human and physical capital which raise worker productivity. The second dividend is typically larger than the first dividend and lasts longer. The magnitude and duration of these dividends vary from country to country and depend on the magnitude and pace of fertility decline and the ability if a county to take advantage of the changes in age structure. Over the six decades from 1955 to 2015, the first and second dividend together were highest in Asia and N. Africa (where the fertility transition was completed quickly and early) and lowest in SS Africa (where the fertility transition was slower and later). Projections to 2075 expect the situation to be reversed in the future: Asia’s dividend will likely be smaller than Africa’s. Although much of the contemporary literature on population and development focuses on the demographic dividend, there are other important benefits from fertility decline: the improvement of health, the empowerment of women, the government’s increased ability to maintain public capital (e.g. schools, clinics, infrastructure), increased political stability, an improved environment, and a slower depletion of natural resources.