Friday, September 01, 2006

Dependency Ratios Revisited

From Tyler Cowen at Marginal Revolution:
"Here is a basic argument and model that the youth dependency ratio can matter.

I can see three possible mechanisms. 1) Fewer babies mean that more women work. 2) Fewer babies mean that each baby gets more parental investment; in the long run those people are smarter. 3) Fewer babies raises the savings rate."
He goes on to argue that none of them explain Ireland, at least not very much. I'm still musing over the way economists think, compared to me. But today the Times had an interesting article on manufacturing in India, including the suggestion that manufacturers, because they can look ahead and see China will soon have a high dependency ratio while India will have a low one, are deciding to invest in manufacturing plants in India.

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