The Demographic Dividend: Evidence from the Indian States

Large cohorts of young adults are poised to add to the working-age population of developing economies. Despite much interest in the consequent growth dividend, the size and circumstances of the potential gains remain under-explored. This study focuses on India, which will be the largest individual contributor to the global demographic transition ahead. The main finding is that there is a large and significant growth impact of both the level and growth rate of the working age ratio. The results imply that a substantial fraction of the growth acceleration that India has experienced since the 1980s—sometimes ascribed exclusively to economic reforms—is attributable to changes in the country’s age structure. With the future xpansion of the working age ratio concentrated in some of India’s poorest states, income convergence may well speed up, a theme likely to recur on the global stage.