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Does Demographic Transition with Human Capital Dynamics Matter for Economic Growth? A Dynamic Panel Data Approach to GMM

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Abstract

This study seeks to empirically investigate whether demographic transition with dynamics of human capital matters for economic growth for a representative sample of developing world. The empirical analysis based on panel of 67 developing countries, using 5-year interval data over 1960–2014, has been done by employing dynamic panel System-Generalized Method of Moments (Sys-GMM) estimator. The empirical findings suggest that demographic transition and human capital, in accordance with the theory, matter for economic growth of developing economies. The economically active population and labor force participation rate have positive contribution in economic growth. Moreover, the inclusion of human capital in level-form makes economic growth more sensitive to changes in human capital. The lag term of human capital yields insightful findings that higher the accumulation of human capital in previous time period, higher will be the economic growth in the current time period. However, the pre-requisite to achieve the benefits of this demographic transition in developing world is flexible labor markets capable to absorb the youth entering the working-age population. For market flexibility, sustained investment in human capital is required.

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Notes

  1. Crude Death Rate describes the number of deaths occurring during a year, per 1000 population and Crude Birth Rate describes the number of live births occurring during a year, per 1000 population. Crude Death Rate minus Crude Birth Rate results into rate of change in population in the absence of migration.

  2. Average number of children per woman at which a population replaces itself, it is usually 2.1 births per woman.

  3. The literature suggests that monetary, fiscal and trade policies affect Total Factor Productivity but they are not focus of the current study.

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Authors and Affiliations

  1. Department of Economics, Pakistan Institute of Development Economics (PIDE), Islamabad, Pakistan

    Munir Ahmad

  2. Department of Economics, The Islamia University of Bahawalpur, Bahawalpur, Pakistan

    Rana Ejaz Ali Khan

Authors
  1. Munir Ahmad
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  2. Rana Ejaz Ali Khan
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Corresponding author

Correspondence to Rana Ejaz Ali Khan.

Appendix

Appendix

Sample of developing countries

1. Algeria

18. Ecuador

35. Dominican Republic

52. Philippines

2. Argentina

19. El Salvador

36. Lesotho

53. Rwanda

3. Bangladesh

20. Fiji

37. Liberia

54. Senegal

4. Benin

21. Gabon

38. Malawi

55. South Africa

5. Belize

22. Gambia, The

39. Malaysia

56. Sri Lanka

6. Bolivia

23. Ghana

40. Mali

57. Sudan

7. Botswana

24. Guatemala

41. Mauritania

58. Swaziland

8. Brazil

24. Guyana

42. Mauritius

59. Syrian Arab Republic

9. Burundi

26. Haiti

43. Mexico

60. Togo

10. Cameroon

27. Honduras

44. Nepal

61. Thailand

11. Central African Republic

28. India

45. Nicaragua

62. Tunisia

12. Chile

29. Indonesia

46. Niger

63. Turkey

13. China

30. Iran, Islamic Rep.

47. Pakistan

64. Uruguay

14. Colombia

31. Iraq

48. Panama

65. Venezuela

15. Costa Rica

32. Jamaica

49. Papua New Guinea

66. Zambia

16. Cote d’Ivoire

33. Kenya

50. Paraguay

67. Zimbabwe

17. Cuba

34. Latvia

51. Peru

 

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Ahmad, M., Khan, R.E.A. Does Demographic Transition with Human Capital Dynamics Matter for Economic Growth? A Dynamic Panel Data Approach to GMM. Soc Indic Res 142, 753–772 (2019). https://doi.org/10.1007/s11205-018-1928-x

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