Population Aging and the Changing Economic Life Cycle: A Global Perspective

Abstract

Most of the world’s populations have begun the long process of demographic transition that will inevitably transform them from young populations to old ones; the lagging countries will soon follow. Although the timing and pace of the transitions differ, the basic structure of change is typically very similar. Starting from an initial equilibrium with slow population growth, mortality first begins to decline while fertility remains high. The population begins to grow more rapidly and the fraction of young people in the population rises as does the child dependency ratio. After some decades, fertility begins its decline which is rapid and brief. The population growth rate slows, the proportion of children falls, and the proportion of working-age population rises. This stage continues for five or six decades, giving rise to the so-called First Demographic Dividend. The smaller birth cohorts eventually begin to move into the working ages, slowing the growth of the labor force, while the growth of the older population accelerates due to rising life span. The share of the elderly rises as does the total dependency ratio, and the population ages. This process largely stops when the smaller generations begin to reach old age. However, due to rising life spans population aging continues, albeit at a slower pace than before.