Demographic Dividend

DEFINITION of 'Demographic Dividend'

The freeing up of resources for a country's economic development and the future prosperity of its populace as it switches from an agrarian to an industrial economy. In the initial stages of this transition, fertility rates fall, leading to a labor force that is temporarily growing faster than the population dependent on it. All else being equal, per capita income grows more rapidly during this time too.

BREAKING DOWN 'Demographic Dividend'

This dividend period generally lasts for a long time - typically five decades or more. Eventually, however, the reduced birth rate reduces the labor force growth. Meanwhile, improvements in medicine and better health practices leads to an ever-expanding elderly population, sapping additional income and putting an end to the demographic dividend.

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