Dynamic demographics and economic growth in Vietnam

Abstract

This paper is an empirical study of the effect of age-structure of population on economic growth in Vietnam. The statistics show that in recent years, Vietnam's demographics have been changing remarkably with an increase in the labor force as well as a decrease in the dependency ratio. This change offers a great opportunity for the economy to enhance its economic growth at least in the short and medium terms. Our estimated results from regression models also indicate that Vietnam has utilized this opportunity: The change in demographics has contributed up to 15% of economic growth during the last five years. Another finding is that while being categorized as dependent, the aged population seems to have no negative impact on Vietnam's economic growth, but the young population does. Vietnam's population will probably shift from a demographic dividend to demographic debt in about 10 years. Therefore, it is very important for Vietnamese government to take advantage of this dividend period in order to improve human capital and technology and prepare a coming period of demographic debt. In addition, building up sound pension and health care systems in the medium term is also a must.

Keywords:

• demographics
• economic growth
• dependence ratio
• age-structure
• demographic dividend
• Vietnam

JEL classifications:

• O160
• J11
• J13

Acknowledgements

I would like to express my thanks to Maureen Todhunter for her prompt responses and to two referees for their valuable comments. I would also thank Glen Shearer for his patience and great help when reading proofs of my paper.

Notes

^a Four provinces are excluded from the set of 61 provinces due to lack of data.

1. Data on growth were calculated by province, taken from the General Statistics Office of Vietnam, and it was greater than the data at the aggregate level due to the problem of double counting.