Age structure dynamics
The age structure of a population reflects mainly its fertility and
mortality history. In high-mortality populations, improved survival tends
to occur disproportionately among children. This effectively creates a baby
boom. Eventually, the boom ends when fertility abates in response to
perceptions of improved child survival and as desired fertility declines
with economic development. But as the relatively large baby-boom cohorts
proceed through adolescence and into their adult years, the population
share at the peak ages for work and saving swells.
This enhances the productive capacity of the economy on a per capita basis
and opens a window of opportunity for rapid income growth and poverty
reduction. Events of the past decade, ranging from the Arab uprisings to
more recent mass protests in Chile and Sudan, also show that countries that
fail to generate sufficient jobs for large cohorts of young adults are
prone to social, political, and economic instability.
The “demographic dividend” refers to the process through which a changing
age structure can spur economic growth. It depends, of course, on several
complex factors, including the nature and pace of demographic change, the
operation of labor and capital markets, macroeconomic management and trade
policies, governance, and human capital accumulation. Nonetheless, the
demographic dividend model can account for much variation in past economic
performance among different countries and regions (e.g., East Asia vs.
Latin America vs. sub-Saharan Africa) and helps identify more- and
less-promising country settings for future economic growth. For example, from 2020 to
2030, Nepal, Jordan, Bhutan, and Eswatini are projected to experience the
largest gains among countries in the ratios of their working-age to
non-working-age populations.
The dependency ratio—the inverse of the working age to non-working-age
ratio—measures the economic pressure working-age individuals face to
support, in addition to themselves, those who are not of working age. In
1990, the ratio in more developed regions was appreciably lower than in
less developed regions (0.68 versus 1.04).
But by 2020, as a result of different patterns of fertility decline and
population aging, the ratio had increased to 0.70 in more developed regions
and decreased to 0.75 in less developed regions. And by 2050, the
dependency ratio is projected to be greater in more developed regions
(0.89) than in those that are less developed (0.77). This switch suggests
that in the coming decades, demographics will be more favorable to economic
well-being in less developed regions than in more developed regions. This
will be especially true in Africa, the only region in which this ratio is
projected to decline by 2050.
For countries that have yet to experience appreciable demographic
transitions (like Chad, the Central African Republic, Somalia, and Sierra
Leone), policies are appropriately oriented toward catalyzing those
transitions. Such policies include investment that promotes infant and
child survival, such as expanded vaccine coverage as well as wider access
to well-provisioned and appropriately staffed primary health care systems.
For populations that have experienced health and survival gains, countries
could benefit from policies to enable a decline in fertility, such as
promoting girls’ education and access to reproductive health and family
planning services.
And countries with relatively sizable portions of the population
concentrated in the high-work and high-savings part of the life cycle need
policies to realize the potential benefits of favorable demographics. Such
policies include support for the operation of competitive labor and capital
markets, equipping workers with human capital, building infrastructure,
sound macroeconomic management, carefully designed trade policies, and good
governance. Such policies are always desirable, but a large working-age
population share raises the stakes.
In some countries, making investments in these various sets of policies
could be challenging, as per capita income is currently lower in real terms
than it was in some of today’s advanced economies when they were at a
comparable demographic stage.
