An Analysis of the Link between Education and the First Demographic Dividend of Bangladesh
The demographic dividend results from the increasing share of working age population to total population. This phenomenon is referred to as the “First Demographic Dividend.” The same window of opportunity is assumed to be closed after a few decades, with the introduction of a “second” dividend resulting from the potential savings accumulated by the wage earners, assuming no further counter-shock in the age structure occurs within the period between the first and second dividend. This study attempts to examine the role of education in Bangladesh in the first demographic dividend, which is characterized by a youth bulge. The study contributes a novel argument to the literature on the estimation of the demographic dividend; the National Transfer Accounts (NTA) methodology (2013), which is applied to a more disaggregated dataset, can characterize a population more meaningfully compared with a conventional practice. The findings of the paper shed light on the debate on the sources of the first demographic dividend—whether this dividend comes from a pure age structure factor or represents an education dividend. Our study uses a methodology that is similar to the NTA methodology and applies the Das Gupta (1993) method to decompose the dividend into an education effect and an age effect. When the economic profiles are further disaggregated by levels of education, the Economic Support Ratio (ESR) decreases and becomes more representative. The major results include the facts that the size of the dividend is lower and driven by an age effect, with a finding of a negative education effect in Bangladesh for the past decades.