Demographic structure and the security of property rights: The role of development and democracy

It is often argued that countries with a high population share of children and young workers should attract large capital inflows from aging industrialized economies. However, many of these countries deter foreign investors by a high risk of creeping or outright expropriation. In this paper we explore whether the correlation between countries' demographic structure and the perceived security of property rights reflects a causal relationship. We show that, in low-income countries, the ratio of young to old workers has a positive effect on the perceived security of property rights if the political system is sufficiently democratic. By contrast, this relationship cannot be observed in middle income countries.

► Property-rights security in poor countries increases in the share of young workers. ► This effect is the stronger the more democratic the political system. ► It cannot be observed in middle-income countries.