The effect of education on the demographic dividend

Abstract

The impact of population structure on economic growth has been studied in recent decades using different methods to estimate the so-called demographic dividend. Besides, education has been pointed out as a key factor in economic growth. We propose a decomposition of the demographic dividend, into age and education effects. We illustrate the potentialities of the method, deriving an application to Mexico and Spain over the period 1970-2100. To that end, we estimate the National Transfer Accounts age profiles by schooling level and apply them to recently available population projections stratified by education level. Our results confirm the role of population age structure in the demographic dividend, but also reveal that education attainment can be even more crucial. Moreover, we find that how both age and education effects finally impact on economic growth depends to a great extent on the specific consumption and labor income age profiles in each country.