Is there a relationship between the dependency rate and economic growth? : A study of the demographic dividend in Sub-Saharan Africa

Abstract: Economists have studied the relationship between population growth and economic growth for a very long time and not found any clear relationships. Recently they have begun to focus on the factors of population growth such as fertility and mortality rates. From this line of study came the age-structure hypothesis. The age-structure hypothesis was founded on the evidence from Asia’s very successful demographic transition and many economists are now wondering whether Sub-Saharan Africa (SSA) will be able to repeat this feat. Hence, this study aims to investigate the relationship between the dependency ratio (a ratio between the dependents (ages 0-14 and 65+) and the number of workers (aged 15-64) in a population (Eastwood and Lipton, 2012)) and economic growth in SSA and search for evidence of a demographic dividend. Not many previous studies have been done focusing completely on SSA and this study therefore aims to shed some light on the subject. The investigation was done by a cross-sectional regression analysis using a sample of 26 sub-Saharan countries and secondary data from mostly the World Bank. The results show a significant relationship between both versions of the dependency ratio and economic growth but do not show evidence of a demographic dividend. Out of the two versions of the age-structure hypothesis, most support was found for the strong version. Furthermore, support was found for the conditional convergence theory and both savings per capita and the initial level of education were found significant. However, the results had problems with severe multicollinearity and it was concluded that the results were not entirely reliable and should not be depended upon.