The Demographic Window of Opportunity and Economic Growth at Sub-National Level in 91 Developing Countries

Jeroen Smits,Lamar Crombach

doi:10.1007/s11205-021-02802-8

Abstract

Data for low- and middle- income countries (LMICs) are used to investigate the effect of the demographic transition on economic growth at sub-national level. We introduce a detailed classification of demographic window phases, determine how these phases are distributed among and within LMICs, and analyze the relationship between the demographic window of opportunity (DWO) and economic growth for 1921 urban and rural areas of sub-national regions within 91 LMICs. Many areas in Asia, Latin America and the Middle East have entered the window, but most of Sub-Saharan Africa is still in the traditional or pre-window phase. Our analyses reveal higher growth rates in areas passing through the DWO. Positive growth effects are particularly strong in rural and more educated regions and in countries with lower levels of corruption. Policy measures aimed at effectively using the DW for achieving growth should combine investments in education and rural development with better governance.

Highlights

The role of the population age structure as a potential source for economic growth is gaining importance in the economic literature (e.g. Canning et al, 2015; Groth & May, 2017; Kelley & Schmidt, 2005)
We aim to contribute to the existing literature on the effects of the Demographic Window of Opportunity (DWO) on economic growth, by studying this relationship at the level of sub-national regions within low- and middle- income countries (LMICs)
Significant informative value can be gained from analyzing the effect of population age-structures on economic growth at a sub-national level in LMICs

Summary

Introduction

The role of the population age structure as a potential source for economic growth is gaining importance in the economic literature (e.g. Canning et al, 2015; Groth & May, 2017; Kelley & Schmidt, 2005). The DWO is a period of several decades that countries go through when moving from a situation of high fertility and mortality to low fertility and mortality. When later fertility decreases, the baby boom generation moves up in the age distribution and after some time enters the working age population. During this period, more women may enter the labor force as less time needs to be spent on children (Aaronson et al, 2021; Bloom et al, 2009; Cristia, 2008). There is high potential for economic growth, which, if realized, is called the “demographic dividend” (Bloom et al, 2003, 2009; Groth & May, 2017)

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