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Definition: How do changes in dependency ratios impact economic growth?

Changes in dependency ratios can have significant effects on economic growth. When the dependency ratio is high, meaning there are more dependents relative to the working-age population, it can put a strain on the economy. This is because a larger proportion of the population is not actively contributing to the workforce and therefore not generating income or paying taxes.

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High dependency ratios can lead to a decrease in savings and investment, as a larger portion of income is allocated towards supporting dependents rather than being saved or invested in productive activities. This can result in lower levels of capital accumulation and reduced economic growth.

Furthermore, high dependency ratios can also lead to increased government spending on social welfare programs and healthcare, as the elderly population requires more support and healthcare services. This can put additional pressure on government budgets and lead to higher levels of public debt.

On the other hand, a low dependency ratio, where there are fewer dependents relative to the working-age population, can have positive effects on economic growth. With a larger proportion of the population in the workforce, there is a higher potential for productivity and innovation. This can lead to increased output, higher levels of savings and investment, and overall economic expansion.

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However, it is important to note that changes in dependency ratios alone do not determine economic growth. Other factors such as technological advancements, educational attainment, and institutional frameworks also play crucial roles in shaping economic outcomes.

Keywords: dependency, economic, population, ratios, growth, dependents, working, changes, number