(Book) Demographic Transition and the Demographic Dividend

(Excerpts from the book)

The rapid population growth in the Philippines over the last several decades has hindered the country’s economic development. From 2000 to 2009, the Philippines had one of the highest population growth rates in the Southeast Asian region at 2.04 percent (as of 2007) and the second largest population of more than 92 million in 2009, next only to Indonesia. It comes as no surprise that in 2006, 32.9 percent of our population, or an equivalent 28 million Filipinos were living below the poverty line (NSCB, 2006).

The core idea which links population and economic growth is demographic transition, described as “a change from a situation of high fertility and high mortality to one of low fertility and low mortality.” A country that enters into a demographic transition experiences sizable changes in the age distribution of the population and this affects economic growth.

The Philippines failed to achieve a demographic transition similar to what its Southeast and East Asian neighbors had in the past three decades. All of the mortality rates of these countries (including the Philippines) broadly declined at similar rates. In the Philippines, however, fertility rates dipped slowly; so while population growth rates substantially dropped to below 2 percent a year in other countries (such as Thailand, Indonesia, and Vietnam), the Philippines’ high population growth rate of more than 2 percent per year barely changed.

Studies show that demographic transition accounts for a significant portion (about one third) of the economic growth experienced by East Asia’s economic “tigers” during the period 1965 to 1995 (Bloom and Williamson, 1997). The effect of the demographic transition on income growth is known as the first demographic dividend. In the course of the demographic transition, countries experience an increasing share of the working age population relative to the total population and this creates favorable effects on the per capita income. In addition to the first dividend, there is another positive effect on economic growth and is referred to as the second demographic dividend. This dividend results when individuals accumulate savings in their working years to serve as buffer during their retirement years. While accumulation of capital can be used to deal with the lowering of income in the older ages, this capital also influences economic growth. As Mason (2007)points out, it is when society increases its savings rate that more rapid economic growth results — creating the second demographic dividend. Mason estimated that the first and second demographic dividends account for 37.7 percent of the yearly average per capita growth rate of Japan from 1950 to 1980.

(Click on the link below to download and view the rest of the book)

Source: http://www.appc-ph.com/web/wp-content/uploads/2010/06/PCPD_policy-brief_may-2010.pdf

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