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Top1. Introduction
Demographic factors have from time to time taken the center-stage in the debate of the sources of economic growth. In the 18th century, Robert Malthus (political economist of the 18th and 19th centuries) wrote “an easy on the principle of population” in which he argued in 1798 that the booming population would doom the world to famine and disaster (Malthus, 1798); he had no idea how wrong he would prove to be. Two centuries on, the world population of 250 million at the time he gave his apocalyptic view has now gone up to over seven billion, and projected to reach 9.8 billion in 2050, and 11.2 billion in 2100 (UNDESA, 2017), despite wars, plague, famine, and epidemics. World food production has been keeping pace with population growth until recently. As such, his theory is wholly discredited; demographers and economists, continue to debate over the correlation between population growth and economic expansion; also, based on diverse arguments from economic demographers and development economists, they wonder if population growth encourages, discourages or is independent of economic expansion.1
Hence, development economists and economic demographers tend to affirm that economic growth in high-income economies is likely to be relatively low in coming years in part due to slow population growth in these economies (Baker et al.,2005), Linden sees population growth as a problematic phenomenon because more people inevitably use more of the finite resources available on earth (Linden, 2017). Coale and Hoover (1958) affirm that sustained high fertility and deteriorating mortality make governments and household burdened with high youth dependency rates, lowering tax revenues and household savings respectively.
Moving beyond the Malthusian arguments, experts have now turned the focus of analysis towards the impact and changes in age structure rather than simply focusing on the amount and rapidity of population growth (or decline) (Mason, 2005a; Birdsal et al., 2001; Sachs, 2002; Bloom and Canning, 1999; Bloom and Freeman, 1986; Bloom and Williamson, 1998). As a result, around the turn of the century age structure and the related theory of a “demographic dividend” received special attention thanks to the series of influential papers from experts (Bloom, Canning, and Sevilla, 2002). With this development, by 2007, the United Nations Commission on Population and Development has focused its fortieth session on the socio-economic implications of changing the age structure (United Nations, 2007).
Speaking of implications, the life cycle consumption model proposes that different age groups in a population have different economic implications. The young needs investment in health and education, adults supply labor, income and savings and at old ages, there is a need for retirement income and, again, a requirement to invest in health. As the relative size of each of these age groups changes in the population, similar is the respective impact of the economic behavior connected with the diverse ages. Because of the declining population growth and consequent changes in age structure, the proportion of the working-age population is increasing in most developing nations, thereby offering a window of opportunity for these nations; this is referred to as the ‘demographic dividend’.
The demographic dividend is definable as the potential economic benefit offered by changes in the age structure of the population, during the demographic transition, when there is a surge in working-age population and an associated decline in the dependent age population. What needs to be emphasized here is that economic gains from demographic dividend are not certain, as the term might misleadingly imply. Economic returns are not solely a function of the demographic dividend. As such, for economic benefits to materialize there is a need for policies dealing with education, public health and those that promote labor market flexibility, and provide incentives for investment and savings. On the contrary, if suitable policies are not formulated, demographic dividend might be a cost, leading to unemployment and an unbearable strain on education, health and old age security.