Demographic Transition and Saving Rates in Pakistan

Abstract

Pakistan is one of the developing countries with a more significant percentage of the working age, i.e., between 14 and 59. When a country has more young people than old ones, it can grow faster than those that have a large number of older people than young people. Economists consider this an opportunity for countries to grow at a higher rate and introduce the term 'demographic dividend' that narrates a phase in which young people (working age population) are in more significant proportion than the dependents. Pakistan's 'demographic dividend' duration is estimated from 1985 to 2045. This scenario in the case of Pakistan has important implications for the labor market, where the labor force can contribute positively to increasing the country's growth rate. An increase in the volume of savings is an essential path through which the labor force can positively contribute to the country's economic health. The present study found out how the age structure of the labor force affects savings in Pakistan. The study showed an inverted U-shaped relationship between age structure and savings. The present study has also suggested some policies to reap the maximum benefits of the age structure in Pakistan.