Demographic dividend

The demographic dividend has become an integral part of many development policy strategies. The term describes a boost to economic growth for countries at the beginning of their demographic transition; a phenomenon most recently experienced by the Asian tiger economies. But what will it take for countries in the Global South to achieve the age structure necessary for the demographic dividend? And under what conditions can this age structure catalyse economic growth?

Favourable age structure as a starting point

The specific age structure of a population that favours a demographic dividend arises during the demographic transition that every country undergoes as part of its socio-economic development. During this development, countries experience a shift from high to low mortality and fertility rates. As a result of improved nutrition and sanitation, mortality rates initially decrease, while fertility rates remain high for some time. This temporarily leads to high population growth. Fertility rates eventually start to decline once it becomes clear that more children survive, when education levels and incomes rise, gender equality improves, and people – especially women and girls – have greater ability to make self-determined decisions about their life. As a rule, governments can accelerate this process by increasing girls’ education and women’s socio-economic empowerment in addition to improving sexual and reproductive health and rights for everyone.

Working towards a demographic bonus

In the course of this process, population growth slows down and the age structure shifts. As the average number of children each woman has decreases, the population shifts from being predominantly young to being predominantly working age. As a result, a relatively large number of people can work, while fewer children and a small population of elderly people need support. When the ratio of the working-age population (15 to 64-year-olds) to the dependent population reaches 1.7 to 1, a demographic window of opportunity opens – the favourable age structure known as the demographic bonus. With additional strategic investments and policies, this demographic bonus can be transformed into economic growth – a demographic dividend.

No easy task

As promising as it sounds, a demographic dividend is by no means guaranteed. To achieve a demographic dividend, countries must create the right conditions. For fertility rates to decline and the age structure to change, people's living conditions must improve in numerous ways. To turn a demographic bonus into a dividend, working-age individuals need high quality education and, above all, jobs. Without opportunities for a better life, a high proportion of young people of working age in the population can lead to social tensions and conflicts. Instead of a dividend, the result could be a demographic disaster.

One path for all states

During their socio-economic development, all countries undergo a demographic transition – albeit at different times and at different speeds. Initially, an improvement in living conditions reduces the mortality rate and, after one to two generations, the birth rate eventually starts to fall. In this intermediate phase, the population grows rapidly. At the end of the transition, populations stagnate or even begin to shrink, provided there is no immigration. This transformation does not only affect the size of a population. It also changes its age structure. © Berlin-Institut

Contacts

Lorena Führ

Project Coordinator International Demography

Phone: +49 30 - 22 32 48 46

E-mail: lorena.fuehr@berlin-institut.org

© Berlin-Institut

Thomas Nice

Researcher

Phone: +49 30 - 31 01 77 67

E-mail: nice@berlin-institut.org

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Catherina Hinz

Executive Director

Phone: +49 30 - 22 32 48 45

E-mail: hinz@berlin-institut.org

Catherina Hinz geschäftsführende Direktorin

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