INTRODUCTION

This paper intends to analyze demographic transition in Asian countries and the way the countries
have benefited from the demographic dividend. We will look at the theory of demographic transition
and impact of population change through economic growth models. Further, we will touch upon
population shift in developed countries such as United States of America, United Kingdom and Japan.
Starting with an overview of Asia, we will analyze the demographic transition in South Asia, Southeast
Asia and East Asia with major focus on China, Japan and India. We will discuss the various
trends of fertility rates, old-age population share, age dependency ratios etc. While we look at the
demographic transitions, we will examine the linkages between population change and economic
growth e.g. the East-Asian miracle. It will also cover inception of Chinas all-time debatable Onechild
policy and its success and socio-economic impacts. Then we would compare China and India
based upon the population trend and economic development in both the countries.
2. ECONOMIC DEVELOPMENT AND DEMOGRAPHIC
TRANSITION
The fundamental variation of population growth rates with the level of development is termed as
demographic transition. There is evidence from past that population growth rates can impact the
overall economic growth rate of the society. The population growth rate is determined by birth rate
and death/mortality rate.
Birth rate
Every couple determines the number of children to reproduce based upon the probability that a child
survives and the extent to which the couple needs old-age care from the child. In absence of
institutions and markets, government support and post-retirement care plans the tendency to expect
old-age care from child increases, so does the birth rate.
Death rate
The carrying capacity of the world has drastically changed over various ages. During the Stone Age
era people were confined to river basins and lower yield of food products. Starvation, famines, etc.
were common and hence a high death rate. With advent of agriculture the carrying capacity of the
world increased tremendously, increasing the population overall. There are multiple factors that
impact death rates- sanitation methods, health practices, medical facilities and innovations, etc.
Population growth rate
As death rates spiral down birth rate follows the decline, but there exists an inertia that results in a
slower decline in birth rates. This results in a population explosion. This phenomenon leads to a
population growth without a considerable increase in economic development. This inertia is mainly
macro (overall population) and micro (family). In poor countries the birth rates and death rates both
tend to be high, which keeps the net population growth rate low. But the population of such countries
is fairly young. Due to such an age distribution the birth rates are usually higher when compared to
developed countries. At family level children are assumed to be an investment. In developing
countries the markets to ensure old-age support are missing because majority of the population is
employed in informal sector. Due to lower income levels, lack of government policies to facilitate
post-retirement planning population has less or no incentive to plan for retirement. In such scenario
children are seen as best assets par excellence.
As per Malthus view the timeline could be divided in three phases. The first phase was the age of
agriculture that increased birth rates tremendously but due to various natural outbreaks like plague,
famine, etc. the death rates remained high keeping the population growth in check. The second phase
was the advent of sanitation practices and further increase in agriculture production. Around 1700
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death rates reduced and rise in industrial development in Europe led to a population explosion. As
time overcame inertia the birth rates fell, tracking the death rates, thus reducing the overall population
growth levels, this is third phase.
Further in this paper we will try to understand the impact of change in population growth rates
through some popular economic growth models.
Harrod-Domar growth model
After a small ammedment to Harrod-Domar growth model to incorporate the population growth rate
we get the below equation. The standard growth model has two components: consumption and
savings; savings are translated into investments and the capital of the economy grows over time.

=1+1+1
s : rate of savings
g*: growth rate per capita income
: capital-output ratio
n : rate of population growth
: capital stock depreciation rate
This model treats capital-output ratio as exogenous variable, whereas an increase in population would
eventually increase the output in normal cases. The ratio of savings and capital-output raion, i.e., the
left hand side of the equation remains constant, for which as n, the rate of population growth increases
to balance the equation g*, growth rate per capita income must drop. This clearly shows that as
population growth rate increases the growth rate per capita income decreases.
Solow model
After some adjustment to the original model, to incorporate the population growth rate we get the
below equation. As per this model intuitively the population has a negative effect as an increase in
population decreases the per capita income. But at the same time it also contributes to the productive
labor. If this increased labor is absorbed in the economy through a change in capital-output ratio there
is an increase in g.
(1 + )( + 1) = (1 ) () + ()
n : rate of population growth
k : steady state capital stock, in terms of effective labor
y : total output
: capital stock depreciation rate
s : rate of savings