Demographic transition and material welfare of households: Evidence from South and South-East Asia

Abstract

The present study aims to investigate the demographic effects of the age structure transition on the material welfare of households in South and South-East Asia. In the midst of a substantial demographic transition with large cohorts of young adults who reached their working-ages and low dependency ratios, households hold huge opportunities to accumulate assets and gain access to essential facilities which will lift up their economic standards of living. To explore the demographic dividend that South and South-East Asian states hold, a fixed-effects model, derived from the economic convergence theory, on a subnational panel data set is used. A particular feature of this study is that the traditional proxy for economic growth, income per capita, is replaced by an asset-based indicator. The asset-based index is comparable across place and time and is highly correlated with human development, income and life expectancy. The results imply that a considerable fraction of the economic performance these districts experienced is attributable to changes in the age structure. With further increase of the working-age cohort relative to the dependent population, districts from the South and South-East Asian states, under the appropriate policies, could accelerate their economic convergence with the rest of the region.