Published Apr 11, 2023 The demographic dividend is a phenomenon that occurs when a country’s population structure shifts from having a high proportion of dependents (children and elderly) to having a high proportion of working-age adults (see also dependency ratio). This shift enables the country to experience accelerated economic growth as it benefits from a larger and more productive labor force. To illustrate the demographic dividend, let’s assume that Country A has a large young population and a relatively smaller number of elderly and working-age adults. As the young population grows up, they become part of the labor force and start contributing to the economy. This increases the number of contributors to the economy, leading to more production, which eventually leads to economic growth. However, at the same time, there is a reduction in the number of dependents that the economy needs to support, which leads to a reduction in the overall burden on the economy. This shift in demographics creates a productive labor force that stimulates economic growth, creates opportunities for investment and entrepreneurship, and leads to poverty reduction and improved education. This situation is often characterized by higher per capita productivity, higher tax revenues, and a reduction in the strain on public welfare programs. The demographic dividend is a potent driver of economic growth that many developing countries are currently experiencing or will soon experience. By creating a productive and growing workforce, the demographic dividend can be a catalyst for economic transformation and development, creating opportunities for investment and entrepreneurship. To fully reap the benefits of demographic transitions, countries must invest in education, health, and infrastructure to ensure the workforce is skilled, healthy, and productive. Without investment, the demographic dividend may not be fully captured, and instead, it may turn into a growth burden, leading to pressures on the environment, social cohesion, and public finance. Overall, the demographic dividend is a critical opportunity for countries and should be carefully managed to ensure maximum benefit.Definition of the Demographic Dividend
Example
Why the Demographic Dividend Matters
Macroeconomics