Demographic Transition in Resource Rich Countries: A Blessing or a Curse?

SummaryThis study argues that resource wealth is a key factor for understanding income effects of demographic transition. We develop a simple model highlighting how the income effect of increased labor supply may depend on resource rents, and provide empirical evidence that support the theoretical predictions. Using panel data covering the period from 1982 to 2006 for more than 120 countries, we find a negative interaction effect between resource wealth and demographic transition on national income. Moreover, the negative interaction effect does not depend on institutional quality, and is found also across different samples.

► We show how the income effect of demographic transition depends on resource rents.
► We use panel data from 1982 to 2006 for more than 120 countries.
► We find a negative interaction between resource rents and demographic transition on income.
► The negative interaction effect does not depend on institutional quality.
► The negative interaction effect is found also outside the MENA region.