Population Dynamics and Economic Development: Age-Specific Population Growth Rates and Economic Growth in Developing Countries, 1965 to 1990

TLDR

Rapid population growth can divert capital to nonproductive segments, leading to undercapitalization, low wages, and weak demand, and is often blamed for stagnation in developing countries, though some argue that labor‑force growth can benefit the economy. The authors analyzed 75 developing countries, regressing real GDP per capita growth (1965‑1990) on demographic models that include total population growth, labor‑force growth, or age‑specific population growth rates. They found that higher child population growth hampers economic progress while higher adult population growth promotes development, a pattern explained by demographic transition and a ratchet effect where economies grow rapidly as baby boomers age into productive roles.

Abstract

In theory rapid population growth forces capital to be spent upon nonproductive segments of the population and encourages the undercapitalization of the economy underemployment low wages and weak market demand. Rapid population growth is therefore often blamed for economic stagnation in less developed countries. Others however believe that rapid labor force growth is good for the economy. The authors conducted a cross-national study of the economic growth rates of 75 developing countries in which the annual average percentage change in real gross domestic product per capita is regressed from 1965 to 1990 on demographic models which incorporate either total population growth rates and labor force growth rates or age-specific population growth rates. The study found that an increase in the child population impedes economic progress while an increase in the adult population fosters economic development. This phenomenon may be due to demographic transition which allows a massive one-time boost in economic development as rapid labor force growth occurs in the absence of large and growing youth dependency. There may also be a demographic ratchet effect in which economies remain stagnant during baby booms but grow rapidly as baby boomers age and assume economically productive roles in society.