(Luận văn) the effect of demographic bonus on economic growth in vietnam and 5 selected countries

t to ng UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES hi ep HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS w n lo ad ju y th yi VIETNAM-NETHERLANDS PROGRAMME FOR MASTER IN pl n ua al DEVELOPMENT ECONOMICS va n THE EFFECT OF DEMOGRAPHIC BONUS ON ECONOMIC GROWTH IN VIETNAM AND SELECTED COUNTRIES ll fu oi m at nh z z k jm BUI THAO VY ht vb By om an Lu Dr NGUYEN TRONG HOAI l.c gm Academic supervisor n ey t re Development Economics va This paper was submitted in partial fulfillment of the requirements for Master’s degree in th Ho Chi Minh City, November 2013 t to ACKNOWLEDGEMENTS ng hi ep First off, I would like to thank the entire VNP’s lecturers for their profound knowledge, inspiring spirit and enthusiasm in teaching process Especially, I would like to send my most extreme w n gratitude to Dr Nguyen Trong Hoai for sharing his professional understanding, perceptive lo ad guidance, precious advice and elaborate comments Besides that, I would like to thank Dr y th Nguyen Thanh Tra and Dr Luca Tasciotti for their valuable recommendations in the early stage ju of Thesis Research Design yi pl I would like to express my special thanks to my classmates in MDE17, who contributed a ua al delighted academic atmosphere and supported me a lot in the learning process I feel very lucky when being acquainted and shared unforgettable memories with all of you n va n I also would like to thank all staff in VNP office for their warm-hearted assistance fu ll Most of all, I would like to thank my parents and my husband for their encouragement and oi m affectionate care at nh z z k jm ht vb om l.c gm an Lu n va ey t re th t to ABSTRACT ng hi ep Demographic change influences to both economic and society at different aspects, especially in the demographic bonus period These changes are not simple in creating the shift in total w n population, the age structure but also establishing the new working age cohort Therefore, the lo role of demographic in economic growth and social stability could not be denied ad y th The purpose of this thesis is to access the effects of demographic bonus to economic growth ju and to investigate the gap between countries at different demographic bonus stage The yi subjects used in this paper include Vietnam and five collective countries in East and Southeast pl ua al Asia n This thesis identifies the factors of demographic bonus that affect to economic growth using va panel data of East and Southeast Asian countries in the period 1995-2010 through fixed effect n fu and panel least squared method The demographic bonus dummy variable is also taken into ll account in this paper in order to examine the gulf between countries have experience in this m oi period and countries have not yet confronted with this unique stage of demographic history It is nh found that young dependency ratio and labor participants rate have a strong impact on at economic growth In addition, all three channels that demographic bonus creates benefit have z z influence to the economic growth, especially the channel of human capital Dummy variable is vb also explored that have a significant meaning in the regression model This proves that there is ht k jm a difference in income between countries at distinguishes stage of demographic bonus gm Key words: Demographic bonus; panel data; fixed effects; dummy variable; East and om l.c Southeast Asia; Vietnam an Lu n va ey t re th t to TABLE OF CONTENTS ng hi ep ACKNOWLEDGEMENT…………………………………………………………………………………2 ABSTRACT……………………………………………………………………………………………….3 w CHAPTER 1: INTRODUCTION n lo 1.1 Problem statement………………………………………………………………………………… ad 1.2 Research Objectives……………………………………………………………………………… 10 y th 1.3 Research Questions……………………………………………………………………………… 10 ju 1.4 Justification of the thesis………………………………………………………………………… 11 yi pl 1.5 Organization of the thesis………………………………………………………………………….11 ua al CHAPTER 2: LITERATURE REVIEW FOR DEMOGRAPHIC BONUS 2.1 Key concepts……………………………………………………………………………………… 13 n va 2.2 Theoretical literature……………………………………………………………………………… 14 n 2.3 Conceptual framework…………………………………………………………………………… 16 fu ll 2.4 Empirical literature………………………………………………………………………………….19 m oi 2.5 Chapter remarks…………………………………………………………………………………….27 nh CHAPTER 3: DEMOGRAPHIC TRANSITION IN EAST ASIA AND VIETNAM, DATA AND at METHODOLOGY z z 3.1 Demographic in East Asia and Vietnam………………………………………………………….29 ht vb 3.1.1 East and Southeast Asia……………………………………………………………………… 29 jm 3.1.2 Vietnam……………………………………………………………………………………………32 k 3.2 Data………………………………………………………………………………………………… 34 gm 3.3 Analytical framework……………………………………………………………………………….35 l.c 3.4 Research methodology…………………………………………………………………………….36 om 3.5 Chapter remarks…………………………………………………………………………………….44 CHAPTER 4: FINDINGS AND DISCUSSIONS an Lu 4.1 Descriptive statistical analyses for demographic bonus……………………………………… 45 4.3 Chapter remarks…………………………………………………………………………………….50 5.3 Limitations and directions for further studies…………………………………………………….54 th 5.2 Policy implications………………………………………………………………………………… 52 ey 5.1Conclusion……………………………………………………………………………………………51 t re CHAPTER 5: CONCLUSION AND POLICY IMPLICATIONS n va 4.2 Empirical results…………………………………………………………………………………….46 t to ng 5.3.1 Limitations…………………………………………………………………………………………54 hi 5.3.2 Directions for further studies…………………………………………………………………….55 ep REFERENCES………………………………………………………………………………………… 56 APPENDICE…………………………………………………………………………………………… 62 w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm an Lu n va ey t re th t to LIST OF TABLE ng hi Table 2.1: Summary of empirical studies……………………………………………………………24 ep Table 3.1: Vietnamese age structure, 1979-2009………………………………………………… 33 Table 3.2: Vietnamese population projection, 2010-2050………………………………………… 33 w n lo Table 3.3: Data sources……………………………………………………………………………….34 ad Table 3.4: Variables’ expected signs…………………………………………………………………43 y th ju Table 4.1: Data descriptive statistics…………………………………………………………………45 yi Table 4.2: Estimation results………………………………………………………………………… 48 pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm an Lu n va ey t re th t to LIST OF FIGURE ng hi Figure 2.1: Relationship between demographic bonus and economic growth………………… 17 ep Figure 3.1: Share of Working-age population in East Asia and selected countries…………… 31 Figure 3.2: Economic growth in selected countries………………………………………………32 w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm an Lu n va ey t re th t to ABBREVIATION ng hi ep CPI: Corruption perceptions index w DB: Demographic bonus n lo GDP: Gross domestic products ad y th HDI: Human development index ju IMR: Infant mortality rate yi pl IV: Instrumental variables n UN: United Nations ua al OLS: Ordinary least squares va n UNFPA: United Nations Population Fund ll oi m TI: Transparency International fu TFR: Total fertility rate nh at TLS: Two stage least squares z z WB: World Bank vb k jm ht WDI: World development indicators om l.c gm an Lu n va ey t re th t to Chapter 1: Introduction ng hi ep w 1.1 Problem statement n lo The transition of population age structure is one of the top concerns of not only demographers ad but also the economists all over the world because many direct and indirect relationships y th between demographic factors and economic growth will contribute to form the prosperity and ju yi the wealth of a nation The shift in age structure will be different from country to country and pl different from time to time Many developed countries in Western Europe and North America ua al reached their demographic bonus in late 19th and early 20th century ( Lindh and Malmberg, n 1999) and this period also could be seen as the noticeble mark in their process of motivate n va economic growth Adversely, some countries in Asia and Africa could not exploit the ‘real bonus’ fu from demographic bonus period and this problem become an encumbrance in their way of ll economic development Therefore, the effect of demographic bonus on economic growth is m oi ambigous if countries which have experience in this period not have a right combination of bonus is not automatically come with free bonus at nh appropriate policies This issue is mentioned in Bloom and Canning (2001) that demographic z z vb With the smoothly co-ordination of social and economical issues in the right policies, jm ht demographic can accelerate the economic growth through the channels of public health, education and economic policies that foster the labor market, trade openness and capital k gm accumulation from savings Some countries in East Asia which have experienced the l.c demographic bonus period and succeeded in alleviating poverty problem (Tahir, 2011) could be lessons for Vietnam in the process of population transition and economic growth om an Lu According to data and calculation from the United Nations Population Fund (UNFPA), Vietnam now is in the period of demographic bonus This period will last within 30 years in average and Vietnam should afford in making suitable policies, governor management ability and th could be taken into account ey lessons from the previous successful countries in experiencing the demographic bonus period t re coordinating between different parts of economy to take benefit from this rare period Besides, n va is considered as a unique event in the long demographic history of a given country As a result, t to The early and recently researches on the relationship between demographic factors and ng economic growth both use variety of methods and they also lead to different results However, hi the proportion of studies which support the effect of demographic factors, especially ep demographic bonus on economic growth take a larger part than the contrary studies and the familiar methods used in these papers are descriptive statistic or econometrics method Thanks w n to the heritance of the previous studies, this paper examine the effect of demographic factors on lo ad economic growth especially in the period of demographic bonus in East Asia and test whether y th there is any difference in countries which experienced demographic bonus with countries ju without demographic bonus In addition, the effect of demographic policy on economic growth in yi the bonus period aslo put into consideration After having draw the impact of demographic pl factors and policies on economic growth, the policies and lessons for Vietnam will be n ua al implemented n va ll fu 1.2 Research objectives oi m The specified objectives of the study are to nh at (i) Examine the effects of demographic factors on economic growth in selected z countries included Vietnam cover the period from 1995 to 2010 z jm ht bonus period and the countries without this period vb (ii) Test the difference between the countries which has experienced in the demographic (iii) Draw some policy implications that Vietnam could learn from the previous successful k om l.c gm countries 1.3 Research questions an Lu This thesis is intended to deal with the main research question is “What is the effects of questions will be employed elaborately (i) Does age structure significantly impact to economic ey t re growth? and (ii) Do demographic bonus and its channels affect to economic growth n va demographic bonus on economic growth?” In order to answer the main question, two sub- simultaneously? th The scope of the paper will be limited in using the data of selected countries in period 19952010 to examine the effect of demographic bonus to economic growth However, this collection 10