Demographic dividends, human capital, and saving

The objective of this paper is to provide new evidence about the development effects of changes in population age structure and human and physical capital. This extends our previous work by developing and employing a more comprehensive model of demographic dividends. In addition, we extend earlier analysis about the quantity-quality tradeoff using newly available NTA data for 39 countries, in contrast to the nineteen with the necessary data in our 2010 study. This permits a more detailed analysis, treating public expenditures and private expenditures separately, and considering the role of per capita income as well as fertility and child dependency in relation to human capital spending. The analysis is used in a simulation with realistic demography to show how human capital investment has varied in relation to the changing demography from 1950 to the present, and how it might be expected to change over the rest of this century. These new estimates are then used in a more comprehensive model that incorporates both human and physical capital. The analysis provides estimates of the first and second demographic dividends and how they are affected by speed of fertility decline. The timing of the effects is documented and the relative importance of investment in physical and human capital is assessed. This improves our understanding of the economic implications of the demographic dividend and particularly the second demographic dividend. (C) 2016 Elsevier B.V. All rights reserved.