Microeconomic Foundations of the Demographic Dividend

Guenther Fink, Harvard School of Public Health
David E. Bloom, Harvard School of Public Health
David Canning, Harvard University
Jocelyn E. Finlay, Harvard University

The potential economic returns to the demographic transition are high. As countries move from a steady state with high mortality and high fertility to an equilibrium with low mortality and fewer children, lower dependency ratios, higher investment in human and physical capital as well as increased female labor force participation contribute to economic growth. In this paper, we analyze the demographic transition at the household level, and investigate the distributional patterns of the economic and welfare benefits associated with the demographic transition across socioeconomic groups within countries and over time. We find significant and large differences in the effects of the demographic transition across socioeconomic status (SES) groups but also substantial behavioral change across all groups in the later stage of the transition, so that the long-run effects of the demographic transition on inequality remain ambiguous.