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Demographic dividend

Demographic change as a driver of economic growth

by Samir Abi

In brief

Life expectancy in Africa has risen thanks to improved health care: mass vaccination in Ethiopia.

Life expectancy in Africa has risen thanks to improved health care: mass vaccination in Ethiopia.

The “demographic dividend” is something that has helped Asian countries in particular, to achieve marked economic growth. It occurs when there is a surge in the number of people of working age, while the birth rate falls and there are not many old people in need of support.

In such a setting, young workers can accumulate assets, and if the savings are productively invested in the country, the economy grows.

Several things must happen for a demographic dividend to materialise. It is not enough to have a comparatively small share of dependent people who need support. There must also be enough jobs for the large demographic group of 15- to 65-year-olds. Only then will increasing disposable incomes lead to higher savings.

Governments can benefit from such an economic boon and harness it for development. Higher productivity and higher incomes can then facilitate more elaborate care for the elderly. In the long term, though, the ageing of society means that a diminishing share of working people has to support a growing number of pensioners, so new problems arise. Whether African countries will benefit from demographic dividends remains to be seen.

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