Abstract
The relationship between population changes and economic growth has been debated since Malthus. Initially focusing on population growth, the notion of demographic dividend has shifted the attention to changes in age structures with an assumed window of opportunity that opens when falling birth rates lead to a relatively higher proportion of the working-age population. This has become the dominant paradigm in the field of population and development, and an advocacy tool for highlighting the benefits of family planning and fertility decline. While this view acknowledges that the dividend can only be realized if associated with investments in human capital, its causal trigger is still seen in exogenous fertility decline. In contrast, unified growth theory has established human capital as a trigger of both demographic transition and economic growth. We assess the relative importance of changing age structure and increasing human capital for economic growth for a panel of 165 countries during the time period of 1980-2015. The results show a clear dominance of improving education over age structure and give evidence that the demographic dividend is driven by human capital. Declining youth dependency ratios even show negative impacts on income growth when combined with low education. Based on a multidimensional understanding of demography that considers education in addition to age, and with a view to the additional effects of education on health and general resilience, we conclude that the true demographic dividend is a human capital dividend. Global population policies should thus focus on strengthening the human resource base for sustainable development.
Highlights
The relationship between population changes and economic growth has been debated since Malthus
Population and Economic Development In reaction to a highly controversial debate over population growth that ranged from horror about a “population bomb” [4] to praising more people as the “ultimate resource” [5], the National Research Council (NRC), through its authoritative 1986 report [6], assessed the global empirical evidence related to the possible benefits of lower population growth, ranging from less degradation of natural resources to effects on savings, innovation, and per capita expenditure on schooling and health
Our reassessment of the evidence 33 y after this report confirms the importance of conditionality and, based on newly available detailed data on educational attainment distributions by age and sex, we can single out human capital formation as a key strategy among a host of relevant government policies
Summary
Wolfgang Lutza,, Jesus Crespo Cuaresmaa,b, Endale Kebedea,, Alexia Prskawetza,c,2, Warren C. Focusing on population growth, the notion of demographic dividend has shifted the attention to changes in age structures with an assumed window of opportunity that opens when falling birth rates lead to a relatively higher proportion of the working-age population This has become the dominant paradigm in the field of population and development, and an advocacy tool for highlighting the benefits of family planning and fertility decline. Our reassessment of the evidence 33 y after this report confirms the importance of conditionality and, based on newly available detailed data on educational attainment distributions by age and sex, we can single out human capital formation as a key strategy among a host of relevant government policies This differentiated conclusion of the NRC report came as a disappointment to the proponents of family planning, who had hoped for clearer evidence on the economic benefits of fertility decline by itself. Our results strongly support this theoretical literature, since we identify the compositional change of human capital as the main correlate to explain economic growth
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