Impact of Demographic Dividend on Economic Growth

AuthorRoli Misra
Publication Date01 January 2015
DOI10.1177/0020881717714685
Date01 January 2015
SubjectArticles
Impact of Demographic
Dividend on Economic
Growth: A Study of
BRICS and the EU
Roli Misra1
Abstract
As the countries pass through the different stages of demographic transition in
their process of development, a window of a demographic opportunity opens in
the phase of rapidly declining infant mortality. The result is an increase in the share
of young adults in the population leading to a ‘youth bulge’. This bulge is indicative
of a large share of the working ages in the population which yield a demographic
dividend and a low dependency ratio. The dividend, however, is transient. The lower
fertility will eventually reduce the growth rate of this potential labour force along
with mortality speeding the growth of elderly population. Thus, countries need to
ensure timely implementation of effective policies to realize the dividend. In this
background, this article attempts to study how economic growth of any country
gets influenced by its demographic dividend. In this study, we have selected Brazil,
Russia, India, China and South Africa (BRICS) and the European Union to see this
relationship between two variables economic growth and demographic dividend
using fixed effect model covering a period of 1990–2015. The results from regres-
sion equation exhibit that relationship between GDP growth rate and demographic
dividend is positive thus, validating our hypothesis that demographic dividend has a
positive impact on economic growth.
Keywords
Demographic Dividend, BRICS, European Union, Economic Growth
The change in the size and the structure of population and its impact on the econ-
omy at the macro level has been a matter of debate. One of the attributes of any
demographic groups which affect not only the demographic structure but also the
Article
International Studies
52(1–4) 99–117
2017 Jawaharlal Nehru University
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0020881717714685
http://isq.sagepub.com
1 Department of Economics, University of Lucknow, Lucknow, India.
Corresponding author:
Roli Misra, Department of Economics, University of Lucknow, Lucknow, India.
E-mail: roli219@gmail.com
100 International Studies 52(1–4)
social, economic and political structure of any economy is the age structure,
which is finding an increasing importance in the debate. As the countries pass
through the different stages of demographic transition in their process of devel-
opment, a window of a demographic opportunity opens in the phase of rapidly
declining infant mortality. The result is an increase in the share of young adults in
the population leading to a ‘youth bulge’. In any country with the youth bulge, the
dependency ratio (ratio of non-working-age population to working-age popula-
tion) will decline. This large cohort of young people with a potential to contribute
to growth become a demographic dividend. However, the demographic dividend
could transform into a demographic disaster in the absence of the prerequisites to
leverage this dividend. While transitioning through the different phases, a country
reaches the middle stage of demographic transition marked by a bulge in the
population pyramid in the middle along with the signs of maturity. This bulge is
indicative of a large share of the working ages in the population which yield a
demographic dividend and a low dependency ratio. The dividend, however, is
transient. The lower fertility will eventually reduce the growth rate of this
potential labour force along with mortality speeding the growth of elderly popu-
lation. Thus, countries need to ensure timely implementation of effective policies
to realize the dividend.
The necessary pre-conditions in the form of health, education, skills and
productivity of the youth population are imperative to reap the demographic
dividend. This, in turn, makes physical investment indispensable in elaborating
employment opportunities and productive capacities. This is essential for the opti-
mum utilization of the working-age population in the light of questionable
employability of the youth in the present times. Children, adolescents and youth
population are the significant component of the working population who are
instrumental in economic growth, hence, their productivity is crucial for all the
efforts to be fruitful. In this context, a cross-country analysis for the period of
1965–1995 by Bloom and Canning (2004) highlights in affirmative the signifi-
cance of ‘favourable age structure’ for income growth with high degree of open-
ness to trade being an important prerequisite.
In this background, this article attempts to study how economic growth of any
country gets influenced by its demographic dividend. In this study, we have
selected Brazil, Russia, India, China and South Africa (BRICS) and the European
Union (henceforth EU) to see this relationship between the variables of economic
growth and demographic dividend. The purpose of clubbing BRICS along with
the EU is that the EU has a strategic partnership with all BRICS countries and
BRICS countries are emerging as potential players as far as development is con-
cerned. The structure of these economies is very different. Brazil specializes in
agriculture, Russia in commodities, India in services, China in manufacturing,
South Africa in mining and quarrying. However, unifying criteria of these five
nations are high economic growth, a certain economic backwardness and large size.
the EU has been going through a phase where its economic growth is slowing down,
fertility is increasing slowly and population is ageing. Furthermore, the EU itself
is a multicultural society which also affects economic growth. Lately, Europe has
been in news due to the civil war and influx of refugees who add on to the problem

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