Optimal Employment Strategy for a Developing Country

Abstract

The effect of population growth and demographic transition on economic growth, poverty, inequality, and on rural livelihoods has been widely discussed and debated (Birdsall & Sinding, 2001). Within this debate, the focus has also been on how the age structure of a country's population could affect its future rate of growth. A productive work force coupled with a larger working age population could offer the opportunity for a country to grow faster. This phenomenon is referred to as the demographic dividend. In the context of East Asia, it has been argued that one of the factors contributing to the annual increase in per capita income of over 6 percent over the period 1960–1995 was the favorable age structure of the population. This enabled them to reap the demographic dividend (Bloom & Williamson, 1998). The latest census report suggests that India's average age is 24. Is India ready to reap this benefit? With constant technological innovations, the employment market demand side has been changing dynamically. The optimal strategy for a country like India is to take the dynamic Ricardian comparative advantage framework and constantly train her workforce and be ready to reap the benefits of the population bulge.