and

Thanks to Allen Kelley and Nancy Birdsall who provided many helpful comments. We are also grateful to Pia Malaney for valuable discussion. The links between demographic change and economic growth are viewed as an interacting system with feedback in both directions. This framework implies that even relatively small exogenous shocks can ultimately have a powerful effect on income if the endogenous linkages between population structure, capital accumulation, and income are sufficiently strong. For example, public health measures that increase life expectancy can lead to an increase in saving and education rates, thereby setting off economic growth. Rising incomes can lead to a reduction in fertility that may trigger a virtuous spiral of falling dependency ratios, greater investment in education, and further economic growth. This virtuous spiral, linking increasing life expectancy, rising incomes, and falling fertility, must eventually come to an end. But it can, in the interim, account for long periods of sustained improvement in living standards in developing countries, especially in the presence of a policy environment that is favorable to enjoying a ‘demographic gift’