Demographic dividend

The "demographic dividend" has become an integral part of many development policies. The term describes a boost to economic growth for countries at the beginning of their demographic transition, as experienced by the Asian tiger economies. But what will it take for countries in the global South to achieve the necessary age structure for a demographic dividend? And what are necessary conditions for the demographic dividend to catalyse economic growth?

Favourable age structure as a starting point

A demographic dividend requires a specific age structure in the population, arising during the demographic transition. During its socio-economic development, every country experiences a shift from high to low mortality and fertility rates. As a result of improved nutrition and hygiene, 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 there is awareness of lower child mortality, when education levels and incomes rise, gender equality improves and individuals have greater freedom to make their own life choices.

Working towards a demographic bonus

As a result, population growth begins to slow and the age structure shifts. When the number of children decreases, the share of the working-age population rises. A relatively large number of people can work, while at the same time there are fewer children and a small old-age population to support. When the ratio of the working age population (15 to 64-year-olds) to the dependent population reaches 1.7, a demographic window of opportunity opens. With additional strategic investment and the necessary policies, this demographic bonus can be transformed into economic growth – a demographic dividend.

No easy task

As promising as the concept appears, a demographic dividend is by no means guaranteed for all countries. There are a number of conditions: for birth rates to fall and the age structure to change, people's living conditions must improve in numerous ways. To turn the demographic bonus into a dividend, the working-age population needs high quality education at all levels and, above all, jobs. Without these prospects, many young people of working age may remain in poverty, potentially creating frustration, social tension and conflict. Rather than a dividend, the result can 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

Research Associate

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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