Role of demographic factors in economic growth of South Asian countries

Abstract

PurposeThis study examines the long-run and short-run impact of demographic factors, i.e. life expectancy, fertility rate and young dependency ratio in determining the economic growth of South Asian countries.Design/methodology/approachThe theoretical foundation of the study relies on demographic transition theory and incorporates life expectancy, fertility rate and young dependency ratio into the production function by means of human capital component. The study uses annual panel data of four South Asian courtiers, i.e. Bangladesh, India, Pakistan and Sri Lanka from 1980 to 2018 and utilizes panel ARDL model to analyze the long run and short run impact of demographic factors on economic growth.FindingsResults show that real stock of capital, fertility rate and life expectancy are positively related with economic growth, while an increase in young dependency ratio reduces economic growth in South Asian countries in the long run. Short-run dynamics show that real stock of capital and life expectancy have insignificant impact on economic growth, while young dependency ratio has negative and significant as well as life expectancy has positive and significant impact on economic growth in South Asian countries. Unidirectional causality exists from young dependency ratio and fertility rate to GDP per capita in the short run.Practical implicationsGovernment has to design policies for better health and education facilities to yield high economic growth as well as better infrastructure and macroeconomic stability to facilitate capital accumulation in the region to foster economic growth.Originality/valueThis study considerably adds into the existing literature by providing better understanding of various demographic aspects and their economic inference by highlighting the demographic changes that South Asia has endured. This study is also beneficial for policymakers and growth analysts in generating effective and sustainable policies regarding population dynamics and economic development of the region.