Demographic Dividend The possible benefits of TEMPORARY Population

Demographic Dividend The possible benefits of TEMPORARY Population Growth Spurt

First take quiz & discuss

Setting the Stage Globally: Start with Hans Rosling http: //www. youtube. com/watch? v=jbk. SRLYSojo Demographic Transition Egeo 312 3

Effects of Population Growth: Does it effect Economic Growth? ? ? 1. Pessimistic Approach 2. Optimistic 3. Nuetrualist

First take quiz & discuss • What is the relationship between population growth rate and residual (or technological) growth rate? • That is does higher population growth lead to lower residual economic growth or not? Or does it have no effect?

Pessimist Thomas Malthus Population Trap

Optimist More people = more minds = more development

Neutralist

Neutralist Population Growth Rate does not determine residual economic growth rate (technological growth)

Age Structure • Ignored • Need to understand relationship between – Age – Income – Consumption

Age vs Income & Consumption Demonstrates how income & consumption vary with age • Key is surplus during working age • Can go to support more kids • Can go to increase technology (capital input)

Demographic Transition REVIEW of Theory

Share working Grows if CBR slows

The demographic dividend Explained in 4 parts Phase A: Preliminary Steps • • Country enters Stage 2 of Demographic Transition Results in large increase of children Dependency ratio increases Little to no change in elderly population life expectancy

Phase B: Window of opportunity opens Mechanics of situation • Country enters Stage 3 of Demo. Trans. • Children decline as proportion of population (see diagram) • Dependency Ratio declines • Little to no change in elderly proportion Worker bulge appears (see diagram) Wise Country follows pro-development policies • Moves to creates Employment opportunities • Pursues international export strategy

Phase C: Dividend Period • • • For about a generation the country rapidly grows and prospers Workers support fewer dependents and tend to invest their growing surplus Country’s policies insure ample employment, investment opportunities, and greater consumption

Phase D: Window closes – but country developed • • • After a generation workers age and begin to retire Stage 4 of Demographic transition entered Dependency ratio climbs based mainly on elderly (see diagram) As Dividend ends Growth of economy slows but continues

Review of China • Phase A – 1970 huge % of children, large dependency ratio • Phase B – 2000 economic miracle, dependency ratio shrinks as do children % • Phase C – 2015 Dividend remains strong, dependency ratio remains small, lots of surplus for investment & lots of workers • Phase D – 2045 Dividend has ended, lots of elderly, dependency ratio again large

Three minute overview https: //www. youtube. com/watch? v=bhkr. S 0 q. SJLg

Only works if Country addresses • Investment in the people – Empowerment – people part of system • • Voice (agency) in own lives Choice in child bearing Choice in joining workforce Chance to accrue personal wealth (capital formation) – Education – skills – Employment – quantity & quality • Industrialization & Urbanization

Countries at various parts of the Demographic Dividend

The demographic dividend in words The demographic dividend is a window of opportunity in the development of a society passing through the demographic transition that opens up as fertility rates decline when faster (super charged) rates of economic growth and human development are possible when combined with effective policies and markets. The drop in fertility rates often follows significant reductions in child and infant mortality rates, as well as an increase in average life expectancy.

The demographic dividend in words The demographic dividend is a window of opportunity 1. fertility rates decline due to economic growth 2. Demographic transition heads into stage 3 and eventually stage 4 3. Super charged development possible when increased labor combined with effective policies and markets. 4. The drop in fertility rates follows reduced child/ infant mortality rates, 5. and increase in average life expectancy.

As women and families realize that fewer children will die during infancy or childhood they will begin to have fewer children to reach their desired number of offspring. However, this drop in fertility rates is not immediate. The lag between produces a generational population bulge that surges through society. At first for a period of time this “bulge” is a burden on society and increases the dependency ratio (more kids). Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall (headed towards stage 4 of Demo. Trans. ) and older generations having shorter life expectancies, the dependency ratio declines dramatically.

This demographic shift initiates the demographic dividend. With fewer younger dependents, due to declining fertility and child mortality rates, and fewer older dependents, due to the older generations having shorter life expectancies, and the largest segment of the population of productive working age, the dependency ratio declines dramatically leading to the demographic dividend. Combined with effective public policies this time period of the demographic dividend can help facilitate more rapid economic growth and puts less strain on families. This is also a time period when many women enter the labor force for the first time. [1] In many countries this time period has led to increasingly smaller families, rising income, and rising life expectancy rates. [2] However, dramatic social changes can also occur during this time, such as increasing divorce rates, postponement of marriage, and single-person households. [3]

China: End of Demographic Dividend China’s Case One Child Policy More Kids Dip More Elderly

Following Japan & China Peak Years of “Cheap & Pleantiful” Workerforce

Africa’s Chance with the Demographic Dividend https: //www. youtube. com/watch? v=o-L 3 Lr. YJQi 0

What drives China’s Growth? • • • Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization

Reform and Restructuring From Communist to Socialist with Chinese Characteristics From Central Planning to Market Driven Economy From Closed-Door policy to Open-Door Policy From Dictatorship to “Centralized Democratic” Decision Making Privatization

Centralized Democracy When Xi’s election was announced at the conference, the deputies to the People’s Congress of the Inner Mongolia Autonomous Region applauded enthusiastically. Xi’s election as a deputy to the NPC through a unanimous vote reflects the common will of more than 500 deputies to the autonomous region’s people’s congress and the willingness of more than 25 million people living on the grassland, and it is a vivid demonstration of more than 1. 3 billion Chinese people’s loyalty toward the Party’s core and support for the people’s leader, a Xinhua News Agency report said.

What Drives China’s Growth? • • • Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization

What Drive China’s Growth? Urbanization -- 1. 5 million per month Industrialization -- Raise productivity -- Monetize economic activities

Urban / Total Population (%) 2000 2005 2010 2015 2020 2025 2030 Australia 87. 2 88. 2 89. 1 89. 9 90. 6 91. 3 91. 9 China 35. 8 40. 4 44. 9 49. 2 53. 2 56. 9 60. 3 Hong Kong 100 100 India 27. 7 28. 7 30. 1 31. 9 34. 3 37. 2 40. 6 Indonesia 42. 0 48. 1 53. 7 58. 5 62. 6 65. 9 68. 9 Japan 65. 2 66. 0 66. 8 68. 0 69. 4 71. 1 73 Korea 79. 6 80. 8 81. 9 83. 1 84. 2 85. 2 86. 3 Malaysia 62. 0 67. 6 72. 2 75. 7 78. 5 80. 5 82. 2 Pakistan 33. 2 34. 9 37. 0 39. 7 42. 8 46. 3 49. 8 Philippines 58. 5 62. 7 66. 4 69. 6 72. 3 74. 6 76. 7 Singapore 100 100 Thailand 31. 1 32. 3 34. 0 36. 2 38. 9 42. 2 45. 8 Vietnam 24. 3 26. 4 28. 8 31. 6 34. 7 38. 1 41. 8 Asia 37. 1 39. 7 42. 5 45. 3 48. 1 51. 1 54. 1 US 79. 1 80. 8 82. 3 83. 7 84. 9 86. 0 87. 0 Latin America 75. 3 77. 5 79. 4 80. 9 82. 3 83. 5 84. 6 Western Europe 75. 3 76. 1 77. 0 78. 0 79. 1 80. 4 81. 7 Source: United Nations, CLSA Asia-Pacific Markets

http: //www. nytimes. com/2013/06/16/world/asia/chinas-great-uprooting-moving-250 -million-into-cities. html? _r=0 https: //www. youtube. com/watch? v=bz. Ba 947 k 2 y. Y

What Drives China’s Growth? • • • Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization

“Scissors” crisis of aging What’s happening here?

Dependency Ratio Old Kids

Replace Brawn with Brains?

Demography and Education Demography Dividend College Enrollment China’s Baby-boomer Generation Young and Educated With money, Will spend

Brain power: US vs China Science and engineering Ph. Ds Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets

What Drives China’s Growth? • • • Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization

Saving is Virtue! Total Household Deposit in China US$5. 13 Trillion Total Deposit Waiting to make deposit

Household Savings / Disposable Income Higher Savings Ratio, Higher Capital Formation, Higher Growth Rate Source: Euromonitor, CLSA Asia-Pacific Markets

Future Savings Trend flat to downward https: //www. kansascityfed. org/~/media/files/publicat/econrevarchive/2016/3 q 16 niepalmer. pdf

What Drives China’s Growth? • • • Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization

Globalization China Accounts for 10% of Global Trade

Drivers for the Growth in Next Decade? • Reform and Restructuring should continue, but no more low hanging fruits • Urbanization and Industrialization another two decades to go • Demography Dividend and Education no more labor growth, productivity to go higher • Savings and Capital Formation need less savings to drive domestic consumption • Globalization slower export growth, trade balance • CONSUMPTION will increase

No More Double Digit Growth

But, Power of Compounding Key Assumption China India U. S. Real GDP 7% 6% 2% Inflation 3% 4% 2% Currency Appreciation 2% 1%

However Consumption Up Demographic Dividend Ending https: //www. kansascityfed. org/~/media/files/publicat/econrevarchive/2016/3 q 16 niepalmer. pdf

Uneven Spatial Development