Demographic dividend refers to the economic growth potential that can result from shifts in a populations age structure, mainly when the share of the working-age population is larger than the non-working-age share of the population. The change in age structure is usually a result of a decline in a countrys birth and death rates. The demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to the growth of the economy. The magnitude of the demographic dividend appears to be dependent on the ability of the economy to absorb and productively employ the extra workers, rather than being a pure demographic gift.

There are two periods of demographic dividend. The first period can last 50 or more years and is characterized by a decline in fertility and mortality rates that boost working population productivity, leading to a demographic dividend. During this period, per capita income grows more rapidly. The second period begins toward the end of the intermediate phase and extends through the late phase, but the policies for realizing the second dividend are best established during the intermediate phase. During the late stage, low mortality and fertility increase the share of the older population, a process known as population aging. Countries at the intermediate stage have the opportunity to exploit the first demographic dividend. The second dividend—increased capital accumulation—is larger than the first dividend, and the combined effects of the two range as high as 1.9 percent a year in East and Southeast Asia.

To realize a demographic dividend, a country must undergo a demographic transition – a shift from high fertility and mortality to low fertility and mortality. Mortality generally falls as child survival rates improve, mainly because of improved health and sanitation standards. Declines in fertility often follow, and as families have fewer children, household resources are freed up to make investments in their long-term well-being. Women with access to family planning services are better able to continue working, strengthening the financial well-being of their families and communities.

In summary, demographic dividend is the accelerated economic growth that may result from a decline in a countrys birth and death rates and the subsequent change in the age structure of the population. The demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to the growth of the economy. The magnitude of the demographic dividend appears...