ETHIOPIAN ECONOMICS · PDF fileSuggested citation: Admassie, Assefa, Seid Nuru Ali, John F. May, Shelley Megquier, and Scott Moreland. 2015. “The Demographic Dividend: An Opportunity

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OCTOBER 2015

THE DEMOGRAPHIC DIVIDEND:

AN OPPORTUNITY FOR ETHIOPIAS TRANSFORMATION

ETHIOPIAN ECONOMICS ASSOCIATION

Suggested citation: Admassie, Assefa, Seid Nuru Ali, John F. May, Shelley Megquier, and Scott Moreland. 2015. The Demographic Dividend: An Opportunity for Ethiopias Transformation, Washington, DC: Population Reference Bureau and Ethiopian Economics Association.

2015 Population Reference Bureau. All rights reserved.

ETHIOPIAN ECONOMICS ASSOCIATION

AcknowledgmentsThis report benefited from the analysis and thoughtful review and comments of many individuals. Assefa Adamassie and Seid Nuru of the Ethiopian Economic Association (EEA) were responsible for the overview of Ethiopias economic situation, programs and policies, and analysis of changes as relevant to the demographic dividend. John F. May of the Population Reference Bureau (PRB) provided the demographic analysis alongside the review of evolving public health efforts in Ethiopia. Shelley Megquier of PRB led the overall editing and review process for the report, contributing to the demographic dividend framework guiding the effort. Scott Moreland of Palladium provided and interpreted results from the DemDiv simulation tool.

Thanks are also due to the following individuals for their helpful comments and contributions: Marlene Lee, program director, Academic Research and Relations, PRB; Peter Goldstein, vice president, Communications and Marketing, PRB; Heidi Worley, senior writer/editor, PRB; Jean-Pierre Guengant, director emeritus of Research, Research Unit University of Paris-I, Panthon-Sorbonne and Research Institute for Development (IRD), Paris; and Sahlu Haile, senior scholar at the David and Lucile Packard Foundation.

This publication was made possible by the generous support of the David and Lucile Packard Foundation.

The contents are the responsibility of EEA and PRB, and do not necessarily reflect the views of the David and Lucile Packard Foundation.

EXECUTIVE SUMMARY ............................................................................ 2

INTRODUCTION ........................................................................................ 2Box 1: What Is a Demographic Dividend? ......................................3

WHAT ETHIOPIA HAS ACCOMPLISHED ................................................. 4

Progress in Social Sectors....................................................................... 4Table 1: Infant and Child Mortality Rates in Ethiopia .......................4Box 2: The Health Extension Program ............................................5

Demographic Changes ............................................................................. 6Table 2: Total Fertility Rates in Ethiopia ..........................................6Table 3: Contraceptive Prevalence Rates in Ethiopia Among Currently Married Women ...............................................................6Figure 1: Population Pyramids for Ethiopia in 1990, 2005, and 2030 (projection) ............................................................................7Box 3: What Triggered the Fertility Decline in Ethiopia? ..................8

Economic Performance ............................................................................ 9Table 4: Highlighting Ethiopian Policy Frameworks.......................10Figure 2: Per Capita GDP in Ethiopia ...........................................11Figure 3: Share of Different Sectors in Ethiopian GDP Growth .....12

NEXT STEPS TO CAPTURE A DEMOGRAPHIC DIVIDEND ..................12

How Big a Payoff Is the Demographic Dividend? ................................13Box 4: Modeling Future Development Outcomes and DemDiv Model ..............................................................................13Figure 4: Ethiopia 2050: Combined Investments Can Reduce Employment Gap ..........................................................................14Figure 5: Ethiopia 2050: Investment Per Capita ...........................15Figure 6: Ethiopia 2050: Projected GDP Per Capita Under Three Scenarios ...........................................................................15

Strengthening the Enabling Policies ....................................................16Table 5: Family Planning Unmet Need, Use, and Demand for Spacing and for Limiting in Ethiopia .........................................17

CONCLUSION ..........................................................................................18

REFERENCES ..........................................................................................19

TABLE OF CONTENTSTHE DEMOGRAPHIC DIVIDEND:AN OPPORTUNITY FOR ETHIOPIAS TRANSFORMATION

List of Frequently Used AcronymsCPR Contraceptive Prevalence RateCSA Central Statistical AgencyEDHS Ethiopian Demographic and Health SurveyFP Family PlanningGDP Gross Domestic ProductGTP-I Growth and Transformation Plan IHEP Health Extension ProgramHEW Health Extension WorkerMoFED Ministry of Finance and Economic DevelopmentMOH Ethiopia Federal Ministry of HealthPASDEP Plan for Accelerated and Sustained Development

to End PovertyPSNP Productive Safety Net ProgramRH Reproductive HealthTFR Total Fertility Rate

OCTOBER 2015

POPULATION REFERENCE BUREAU

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Executive SummaryThis report explores the potential for a demographic dividend in Ethiopia. In the past two decades, Ethiopia has experienced an impressive decline in fertility, enjoyed strong economic growth, and made great strides in poverty reduction. Ethiopia has established proactive public policies to address its demographic patterns, such as programs to reduce infant and child mortality, improve education, and increase access to family planning (FP). As mortality and fertility levels decline, Ethiopias working-age population may grow in relation to the number of young dependents, opening a window of opportunity for the accelerated economic growth known as a demographic dividend. Human capital investments and vigorous job growth are both crucial to achieving the economic growth associated with a demographic dividend. The need to make timely investments in human capital and the economy in order to realize a demographic dividend warrants an exploration of Ethiopias development policies and frameworks.

By revisiting and reflecting upon the main arguments and recommendations of the 2007 World Bank report, Capturing the Demographic Bonus in Ethiopia: Gender, Development, and Demographic Actions, this report examines what Ethiopia has achieved in recent years and identifies areas that need further action and investment. This report takes stock of socioeconomic progress, demographic change (with a special focus on fertility transition), economic growth, and economic policies. The report uses the DemDiv simulation to illustrate the potential size of a demographic dividend in Ethiopia. The results of this exercise show that the greatest potential gain stems from the synergy among policies across health,

education, and economic sectors. Finally, the report explores some new pathways needed to consolidate and expand ongoing development efforts.

Ethiopia has made remarkable progress in social sectors and seen rapid demographic changes during the past decades. School enrollment at all levels has increased considerably, particularly for Ethiopian girls. In health, progress has been impressive as well. Life expectancy at birth has increased and fertility has decreased from 7.2 children per woman in 1990 to 4.1 children in 2014. This fertility decline has been triggered by a rapid expansion of contraceptive coverage (modern methods) during the same period. Last but not least, the country has also achieved significant improvements in its economic performance.

Ethiopia may be on the path to reach its demographic window of opportunity and capture the potential benefits of a demographic dividend. For this to happen, however, the country will need to continue to improve social policies, accelerate its demographic transition, and implement policies to foster economic growth. Improvements in female education will be crucial, as well as the expansion of modern contraceptive use to further decrease fertility. In addition, economic policies should encourage labor market flexibility, savings programs, expansion of labor-intensive sectors (such as agriculture and manufacturing), and stronger public-private partnerships.

THE DEMOGRAPHIC DIVIDEND: AN OPPORTUNITY FOR ETHIOPIAS TRANSFORMATION

IntroductionThe impact of population on economic development has been a subject of major political and academic debates.1 Some researchers have argued that high fertility and rapid population growth inhibit development. Others have argued that rapid population growth can actually promote economic prosperity.2 More recent studies have found that population growth has an ambiguous effect on economic development.3 To a large extent, the debates have focused on the effect of population size on economic growth, with little attention paid to the age structure of the population.

The impact of population growth on economic development is at the heart of contemporary interest in Africas demographic dividend, or demographic bonusthe potential for accelerated economic growth associated with an increase in the economically active share of the population (see Box 1, page 3). This report revisits and reflects upon the main arguments and recommendations of the 2007 World Bank report, Capturing

the Demographic Bonus in Ethiopia: Gender, Development, and Demographic Actions. It examines what Ethiopia has achieved in the last 10 years and reflects on areas warranting further actions and investments.

In the mid-to-late 20th century, four countries in Ea