The Asian economy has showed a very fast demographic change because fertility and mortality rates of population have signicantly decreased over the last few decades. So, it is expected the economic growth rate is aected by demography over the time 1971-2012. Since demographic changes imply in changes on the economy, the demographic change has a signicant eect on economic growth. Also, this change is not equal in all over Asia. In this paper it has been investigated if demographic change plays a role in the dynamic of economic growth rate in Asia. This paper also has investigated how the income per worker aects the total fertility and life expectancy. Also it has been examined the role of the demographic transition in explaining cross-country dierences in economic growth, with a particular focus on South Asia. Result shows that population growth in working age group has a positive eect, where rapid growth in total population has a negative eect on economic growth. Income has positive relationship with life expectancy, but with fertility rate it becomes negative.

1. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Demographic Change And Economic Transitions in
Asia
Md Abu Sayem
Roll no: FH-017
Institute of Statistical Research and Training
University of Dhaka
March 13, 2015
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 1 / 21

2. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Outline
1 Introduction
Background
Objectives
2 Literature review
3 Data sources and variables
4 Methodology
Economic model
Statistical Model
5 Analysis and Results
6 Conclusion
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 2 / 21

3. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Background
In recent years, Asian demography is changing quickly.
Young and elderly people require extra health care, prime-age
adults supply labour and savings.
Working age people taking few child, so there might be a
relation between age structure and GDP growth rate.
There is huge study to find relation between demography and
economy in Asia.
All study have found strong relationship.
Some geographical variable also affect the economical
condition.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 3 / 21

4. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Objectives
To find the relation and pattern among demographic variables
and economic growth.
To show the differences in different regions in terms of
economic growth.
To find the effect of income on birth and death rate.
To obtain the causes of increase of life expectancy and
decrease of birth and death rate in different regions of Asia.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 4 / 21

5. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Literature Review
Hussin and Saidin(2012) has examined the impact of
economic variables such as foreign direct investment (FDI),
openness and gross capital formation to economic growth over
the period 1981- 2008 in ASEAN-4 countries. Using OLS
estimation, they found that openness has negative effect on
GDP.
Alexandre et. al(2012) investigated if demographic change
plays a role in the dynamic of regional economic growth in
Brazil. They used pooled and fixed effect regression model to
show this relation. They found it significant.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 5 / 21

6. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Literature Review
Hussin and Saidin(2012) has examined the impact of
economic variables such as foreign direct investment (FDI),
openness and gross capital formation to economic growth over
the period 1981- 2008 in ASEAN-4 countries. Using OLS
estimation, they found that openness has negative effect on
GDP.
Alexandre et. al(2012) investigated if demographic change
plays a role in the dynamic of regional economic growth in
Brazil. They used pooled and fixed effect regression model to
show this relation. They found it significant.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 5 / 21

7. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Literature review
Bloom and Finley(2008) examined the role of the
demographic transition in explaining cross-country differences
in economic growth, with a particular focus on East Asia.
They showed that with the working-age share beginning to
decline in many Asian countries, innovation and flexibility in
the labor market will have required for them to continue to
enjoy the high rates of economic growth.
Using cross-country analysis and employing a growth
regression for a panel of 78 countries, Bloom and Williamson
(1997) examined the effects of demographic transitions on
economic growth.They found working age people affect GDP
growth positively and total population growth affect
negatively.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 6 / 21

8. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Literature review
Bloom and Finley(2008) examined the role of the
demographic transition in explaining cross-country differences
in economic growth, with a particular focus on East Asia.
They showed that with the working-age share beginning to
decline in many Asian countries, innovation and flexibility in
the labor market will have required for them to continue to
enjoy the high rates of economic growth.
Using cross-country analysis and employing a growth
regression for a panel of 78 countries, Bloom and Williamson
(1997) examined the effects of demographic transitions on
economic growth.They found working age people affect GDP
growth positively and total population growth affect
negatively.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 6 / 21

9. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Data sources and variables
Table: Data Sources
Variable name Variable Description Source Summary
Growth GDP per capita Annual average change in the
log of real GDP per capita over
5 years
WDI 2012
Tropical location Fraction of tropical area PDX
Landlocked Landlocked country dummy Wikipedia
Population growth Annual average growth of the
total population over a 5 year
period
WDI 2012
log working-age popula-
tion to total population
ln(working-age popula-
tion/population)
WDI 2012
Life expectancy Life expectancy at birth WDI 2012
Population density People per square km. WDI 2012
Infant mortality Infant mortality rate WDI 2012
24 countries data has been used from 1971 to 2012.
Most of the data has been collected from World Bank(WDI
2012).Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 7 / 21

10. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Economic Model
This study has followed the economical model which was derived
by Bloom and Williamson(1997). The model is given as
Economical Model
gˆy = −λ1 ˆy + λ2 ln(L/P) + λ3βX + λ4gpopulation + (1)
Where
gˆy = GDP growth rate
ˆy=log GDP per capita
L/P=Ratio of working age population to total population
gpopulation = the growth rate of population
λi s are the coefficients
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11. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Statistical Model
Two types of statistical model was used,
1 Fixed effect model
2 Random effect model
Fixed effect model
We assume that slope coefficients are constant but the intercept
varies over time;
Yit = α1 + α2D2i + α3D3i + · · · + β2X2it + β3X3it + · · · + uit
(2)
where X’s are the independent variable, Di is the dummy variables
and α, β, λ are the coefficients.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 9 / 21

12. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Statistical Model
Two types of statistical model was used,
1 Fixed effect model
2 Random effect model
Fixed effect model
We assume that slope coefficients are constant but the intercept
varies over time;
Yit = α1 + α2D2i + α3D3i + · · · + β2X2it + β3X3it + · · · + uit
(2)
where X’s are the independent variable, Di is the dummy variables
and α, β, λ are the coefficients.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 9 / 21

13. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Statistical model
Assumptions of fixed effect model
uit are independent.
E(uit) ∼ N(0, σ2)
Slope coefficients are constant
Random effect model
The random effect model is;
Yit = β1 + β2X2it + β3X3it · · · + ωit (3)
Where
ωit = i +uit
i = individual specefic error component
uit = combined time series and cross-section error component
(4)
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14. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Statistical model
Assumptions of fixed effect model
uit are independent.
E(uit) ∼ N(0, σ2)
Slope coefficients are constant
Random effect model
The random effect model is;
Yit = β1 + β2X2it + β3X3it · · · + ωit (3)
Where
ωit = i +uit
i = individual specefic error component
uit = combined time series and cross-section error component
(4)
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 10 / 21

15. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Statistical model
Assumptions for i and uit
i ∼ N(0, σ2
)
uit ∼ N(0, σ2
)
E( i , uit) = 0 E( i j ) = 0 i = j
E(uituis) = E(uitujt) = E(uitujs) = 0 (i = j; t = s).
Assumptions for ωit
E(ωit) = 0
var(ωit) = σ2
+ σ2
u
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 11 / 21

16. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Statistical model
Assumptions for i and uit
i ∼ N(0, σ2
)
uit ∼ N(0, σ2
)
E( i , uit) = 0 E( i j ) = 0 i = j
E(uituis) = E(uitujt) = E(uitujs) = 0 (i = j; t = s).
Assumptions for ωit
E(ωit) = 0
var(ωit) = σ2
+ σ2
u
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 11 / 21

17. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Analysis and Findings
Graphical representation: GDP growth in 1971 and 2012
-5 0 5 10 15 20
mean of gdp_growth
United Arab Emirates
Thailand
Syria
Sri Lanka
South Korea
Singapore
Saudi Arabia
Philippines
Pakistan
Oman
North Korea
Nepal
Malaysia
Kuwait
Jordan
Japan
Israel
Iran
Indonesia
India
Hong Kong
China
Brunei
Bangladesh
Figure: GDP growth in 1971
-2 0 2 4 6 8
Mean of GDP growth
United Arab Emirates
Thailand
Syria
Sri Lanka
South Korea
Singapore
Saudi Arabia
Philippines
Pakistan
Oman
North Korea
Nepal
Malaysia
Kuwait
Jordan
Japan
Israel
Iran
Indonesia
India
Hong Kong
China
Brunei
Bangladesh
Figure: GDP growth in 2012
Overall GDP growth of Asia has increased
GDP growth of Saudi Arabia and Iran has decreased
GDP growth of Bangladesh was negative in 1971, but it is now in positive.
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 12 / 21

18. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Analysis and Results
Graphical representation: Realationship of fertility rate and life expectancy with GDP growth
68101214
LogGDPperworker
40 50 60 70 80 90
Life expectency
Figure: Relation between GDP
per worker and Life expectancy
68101214
LogGDPperworker
0 2 4 6 8
Total Fertility Rate
Log GDP vs Total fertility rate
Figure: Relation between GDP
per worker and Fertility rate
GDP growth per worker and Life expectancy is positively related
GDP growth per worker and fertility rate is negatively related
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 13 / 21

19. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Regression Results
GDP growth rate is independent variable
Table: Explaining cross country economic growth, 1971-2012
(1) (2) (3)
Independent variables OLS OLS OLS
log GDP per capita −.381∗∗∗
−0.759∗∗∗
−0.749∗∗∗
(-3.71) (-4.16) (-6.06)
Proportion land area in tropics .502 0.00498 1.242∗∗
(1.33 ) (0.01) (2.36)
Access to port(landlocked) −1.927∗∗
−2.11∗∗
-0.840
(-2.19) (−2.31) (-0.94)
Population growth rate −0.252∗∗
0.220∗∗
(2.42) (2.03)
Log ratio of working age to total population 5.061∗∗
(2.39)
Life expectancy -0.587
(-0.95)
Infant mortality −0.0196∗
(-1.76)
Eastern Asia 0.999∗
(1.76)
Southern Asia −2.112∗∗∗
(-3.50)
South-eastern Asia -0.968
(-1.51)
Constant 7.915∗∗∗
−5.577 10.446∗∗∗
(9.28 ) (-0.65) ( 8.82)
Wald χ2
17.79∗∗∗
29.11∗∗∗
49.86∗∗∗
AIC 6026.173 5653.57 5992.815
BIC 6045.731 5692.165 6031.916
Md Abu Sayem March 13, 2015 Demographic Change And Economic Transitions in Asia 14 / 21

20. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Regression Results
Interpretation
OLS-1 represents the relation between GDP growth per capita
and geographic variable. Which shows that the landlocked
country has a significant effect on GDP growth.
OLS-2 represents the relation between growth in GDP per
capita and geographic and demographic variables. Here, we
can see that Landlocked and among 4 demographic variables
three of them are significant. From demographic variables,
growth rate in total population has a negative effect on
growth in GDP per capita where ratio of working age
population to total population has a significant positive effect.
OLS-3 shows the geographic and regional effect on GDP
growth per capita. From results we see that proportion land
area in tropics has a positive effect. Eastern Asia and
southern Asia has a significant effect on change in GDP
growth pattern relative to western Asia.
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21. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Effect of income on life expectancy
Regressions results: Life Expectancy is independent variable
Table: The effect of income on life expectancy
(1) (2) (3)
Independent variables OLS(Fixed effect) OLS OLS
log GDP per worker −0.0038 0.0527∗∗∗
0.0359∗∗∗
(0.75[1]
) (26.87) (16.89)
Dummy 1981-1990 0.052∗∗∗
0.0562∗∗∗
0.062∗∗∗
(14.12[1]
) (7.82) (9.95)
Dummy 1991-2000 0.094∗∗∗
0.094∗∗∗
0.104∗∗∗
(23.63[1]
) (13.13) (16.76)
Dummy 2001-2010 −0.073∗∗∗
0.126∗∗∗
0.139∗∗∗
(19.1[1]
) (17.46) (22.19)
Eastern Asia 0.0517∗∗∗
(8.22)
Southern Asia −0.069∗∗∗
(-9.44)
South-eastern Asia 0.011∗
(1.72)
Western Asia 0
(omitted)
Constant 4.233∗∗∗
3.639∗∗∗
3.796∗∗∗
(88.42[1]
) (194.89) (170.91)
Wald χ2
1363.9∗∗∗
2147.58∗∗∗
AIC -3411.483 -2139.016 -2402.877
BIC -3387.405 -2114.938 -2364.352
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22. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
The effect of income on life expectancy
Interpretation
1 The period 1971–1980 was taken as base period.
2 There is no effect of income on life expectancy in OLS-1
(Fixed effect). Life expectancy increased in period 1981–1990
and 1991–2000 but decreased in 2001–2010 relative to base
year.
3 Log GDP per worker has a significant positive effect on life
expectancy in OLS-2. This regression also shows that life
expectancy has significantly increased in all period.
4 OLS-3 represents the effect of income on life expectancy for
different periods and different regions. It also shows the
significant positive effect of income on life expectancy.
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23. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Relationship between fertility and income
Regressions results: Log fertility is independent variable
Table: The effect of income on fertility rate, 1971-2012
(1) (2) (3)
Independent variables OLS(Fixed effect) OLS OLS
Constant 1.712∗∗∗
2.379∗∗∗
3.107∗∗∗
(9.0[1]
) (22.87) (25.22)
log GDP per worker −0.02 −0.095∗∗∗
−0.159∗∗∗
(0.98[1]
) (-8.71) (-13.85)
Dummy 1981-1990 −0.231∗∗∗
−0.188∗∗∗
(14.82[1]
) (-4.79)
Dummy 1991-2000 −0.475∗∗∗
−0.396∗∗∗
(27.59[1]
) (-9.92)
Dummy 2001-2010 −0.706 −0.613∗∗∗
(36.47[1]
) (15.27)
Eastern Asia −0.881∗∗∗
(-25.05)
Southern Asia −0.369∗∗∗
(-9.04)
South-eastern Asia −0.479∗∗∗
(-14.00)
Western Asia 0
(omitted)
Wald χ2
425.28∗∗∗
870.37∗∗∗
AIC -849.5339 -490.999 730.0886
BIC -824.995 1016.071 754.1613
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24. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Relationship between fertility and income
Regressions results: Interpretation
1 The above table explains the effect of income on fertility
taking log fertility as dependent variable.
2 Column–2(OLS-1) shows the fixed effect relation between
fertility and income per head and four different periods. Here
log GDP per worker is not significant and period 2001–2010 is
also not. But period 1981–1990 and 1991–2000 has a negitive
effect on fertility. Which means fertility has decreased in these
periods relative to period 1971–1980.
3 Column–3 (OLS-2) shows the random effect relation between
log fertility and income for different periods. This declares
that income has a significant negative effect on fertility.
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25. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Conclusion
Bloom et. al.(1999) showed that western Asia has achieved
Huge change in GDP growth using the data up to 1990.
GDP growth in western Asia has decreased, but increased in
other area.
Land area in tropics affected GDP growth negative in previous
1990, but in this study it has found positive.
Increase in total population growth showed a negative
relationship with GDP per capita growth.
Increase in working age population growth have a positive
effect on GDP growth.
Southern Asia is still poorer than other regions.
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26. Introduction Literature review Data sources and variables Methodology Analysis and Results Conclusion
Thank You
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