Early in the demographic transition the proportion of children in the popu-
lation will be increase, this in turn will reduce the share of working-age adults,
and so reduce the growth of per capita income. Over time those children will
move into the labour force and the population will comprise an increasing
share of working-age adults and the early demographic burden will become a
demographic dividend. The demographic dividend can boost economic growth
through three mechanisms. The first is labour supply. Children born during
high fertility years enter adulthood and become productive workers. Women in
particular are then more likely to enter the labour force as a declining fertility
rate gives them the freedom to do so. The second impact is through savings
(and so the resources available for investment). Working-age adults have the
potential to save more, whilst the increase in life expectancy associated with
the demographic transition gives more time to save and more incentive to do so
(longer retirements). The third is human capital. Lower fertility allows families
to increase educational expenditure on each child. The demographic dividend
is a temporary phenomenon and will disappear as the bulge of working-age
adults retires. Data from 78 Asian and non-Asian countries for the years
between 1965 and 1990 show no significant relationship between overall
population growth and that of GDP, but growth of the working-age (15–64
years) population did have a positive and significant impact on per capita GDP
growth. Between 1965 and 1990 the working-age population in East Asia grew
2.39 per cent per annum faster than overall population growth (1.58 per cent)
and growth of the dependent population (0.25 per cent). These results imply
that population dynamics can explain one-third of the total growth rate in East
Asia (Bloom and Williamson, 1998).
Part of the rapid growth in China over the past three decades can be
explained by demography. After rapid population growth in the early 1960s,
and subsequent sharp falls in fertility, a bulge of young people entered the
labour force during the 1980s and 1990s. During these decades the working-
ag e population grew by 2.5 per cent annually. With rural to urban migration
included, the urban labour force grew by more than 4 per cent per annum. By
2000 70 per cent of the Chinese population were between 15 and 64; signifi-
cantly higher than the average for all developing countries. Over these years the
Chinese economy successfully absorbed much of this extra labour into export-
oriented manufacturing industries. This demographic dividend is now grinding
to a halt, leading some to think that economic growth in China will slow.
Growth of the working-age population is likely to have ceased by 2015. The
only source of labour force growth will then be migration from rural areas. It is
estimated that the number of Chinese over 60 years of age will increase from
128 million in 2000 to 350 million in 2030. India is also experiencing a delayed
though similar demographic dividend. India is now one of the youngest coun-
tries in the world. In 2000 one-third of the population were below 15 years of
ag e and another fifth were aged between 15 and 24. The population aged
between 15 and 24 increased from 175 million in 1995 to 210 million in 2010.
This demographic dividend has created a large and growing labour force.
Population and Economic Growth/Development 83