Impacts of demographic transition on economic growth, environmental quality, and labour productivity in developing countries

This thesis investigates the economic and environmental consequences of demographic change within the context of developing nations. This study applies the ‘‘Dynamic Common Correlated Effect (DCCE)’’ and ‘‘Cross-sectionally augmented Autoregressive Distributed Lag (CS-ARDL)’’ estimators to obtain the results. The first objective examines the impact of demographic dividends on economic growth in developing nations using panel data from 71 countries between 1980 and 2019. The results reveal that the demographic dividend measured as population 15-64 substantially increases economic development; however, the result showed that the increase of the youth population is the main hindrance to the economic progress of developing countries. This study finds heterogenous evidence while splitting the sample into lower and higher-income countries. The lower-income countries are in a relatively better position to reap the benefit of demographic dividends than higher-income countries. However, the negative effect of the youth population on economic growth is more pronounced in lower-income countries. Higher-income countries are more advantageous than lower-income countries in utilising the second demographic dividend. The second objective is based on panel data from 82 developing countries. The estimated evidence shows that the growing population of the working-age group (age 20-64 years) significantly creates more CO2 emissions. In addition, the ratio of people aged 50-64, 35-49, and 20-34 also considerably increases CO2 emissions. Moreover, the effects of the population ratio of below 20 years and old-age people 65 years and above do not substantially increase CO2 emissions. For the lower income countries, younger age groups such as age 20-34 and 34-45 years significantly emit more CO2, while for the higher income countries, older generations such as age 65 years and above and age 50-64 years significantly emit CO2. The third objective of this study is to examine the impact of an ageing population on labour productivity in developing countries. The analysis is based on a dataset of 79 developing countries from 1991 to 2019. Unlike previous studies, the results of this study show that older workers (aged 55-64) are still productive in increasing aggregate output. However, the ageing population (population aged 65+) have an adverse effect on aggregate productivity. The results also show that employment in the services and industrial sectors significantly contributes to increased aggregate labour productivity, while the agriculture sector significantly reduces productivity. The results for lower-income countries show that the contributions of older workers are less substantial in improving productivity than in higher-income countries, and the adverse effect of the ratio of the older population is more prominent in lower-income countries than in higher-income countries. The results suggest that in order to best reap the benefits of the demographic dividend, the government must increase its expenditure on education. Since the demographic dividend was found to be less strong in higher-income countries, these countries are experiencing slower growth of working-age populations and should be prepared for ageing populations. The low level of human and physical capital and poor labour market conditions are the problems that can be improved to increase the favourable role of demographic dividends in the economic development of developing countries. In addition, the results imply that demographic factors, especially age structure, are essential in determining environmental emissions in developing countries and should, therefore, be considered in taking measures for sustainable development of the economy and environment. Lastly, this study's results also suggest that policymakers should encourage lifelong learning and training to maintain productivity among the older working-age population.

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