Aging Population, Emigration and Growth in Barbados

Economies may differ in total factor productivity (TFP) and population structure, but may be identical in all other respects, including preferences and production technology. The differentials in TFP and production structure may explain the differences in rate of return in capital across countries. As fertility declines, certain features of development are observed due to government’s successful intervention. Experience indicates that young people show evidence of above –average mobility for better incentives in such a situation with particular reference to small economies. The country however, may be benefited due to remittance.
It is useful to mention the effect of remittances on economic growth. Remittances are transfers of money by a migrant back to his or her native country. The remittance effect of migration is particularly important for the national savings in the migrants’ country of origin. As far as the country of origin is concerned, it is equivalent to external savings, which are neither liable to interest nor repayment. As such they help cover any balance of payments deficit. The greater the proportion of them spent on productive investment, the more favorable the effect they have on the economic development of the country of origin If remittances are used for consumption or on speculative investment instead ( property, foreign luxury goods), their welfare effect drops accordingly. Remittances have played an important role in financing the external trade deficits of selected developing countries.
But this remittance is too small to create the ideal investment environment in the country. The capital is assumed to be mobile depending on two aspects, one, the structure of labor market and two, types of industry (high value vs. low value). Theoretically, demand for labor of a high value firm should maintain an equilibrium condition with supply of labor with high- tech knowledge in a country. If it is not, the firm may have other options. Firms may not decide to manufacture low- tech products in these economies because of high cost of protected labor market. This condition explains the savings and investment gap in a small economy.


Recent statistics reveals age composition of the population of Barbados during 1970-2000. It shows that it had the highest youth dependency ratios (68 percent) in 1970. In 2000, the figure has been declined to 32. This phenomenon was most pronounced in 1980, when youth dependency rate fell from 68 in 1970 to 49 in 1980.

This is partly explained by the government effective intervention in the basic education sector. Thus the island nation experienced a rapid decline in fertility and in 2000 it has youth dependency ratios near to 32 percent. It is interesting to note that in North America, where youth dependency rose to a peak of 52 percent in 1960, while it was more subdued in the EU where youth dependency increased only slightly, peaking at 39 percent in 1970. Subsequently, both regions experienced a rapid decline in fertility and now have youth dependency ratios near 30 percent.

Interestingly the above, underscores the severity of population aging in Barbados, where old-age dependency ratio has increased from 16 in 1970 to 18 in 2000. Interestingly, the sex ratio (Female-male ratio) was almost equal in the age group 0-14 in all the periods under study. Afterwards, females dominate the ratios partly explained by male population to emigrate to Canada, USA and UK for higher education and job opportunities. As a result, female population dominates among the aging population in all the four periods.

In contrast the growth is erratic. Tourism is the major contributory factor that explains growth of the economy. Manufacturing has almost been eroded due to both high cost of labor and other non-tradable goods and services. More strikingly, government subsidies and transfers have been increasing in several sectors such as health cares, housing and NIS (National Insurance Schemes) partly due to service the growing aging population.

Like most of the economies Barbados also suffers from a shortage of qualified people. The Caribbean experience reveals an interesting insight in this context.The policymakers at the initial stage of development targeted the formation of social capital in the region. That implicitly explains less demographic pressure. In the process social capital and trust made economic transactions more efficient by giving parties access to more information, enabling them to coordinate activities for mutual benefit, and reduced opportunistic behavior through repeated transactions. Indeed, this has played a contributory role in explaining the region’s economic development.

It is imperative to mention here that international capital flows as a function of two key fundamentals: demographics and productivity growth. Emigration as part of the demographics may have both positive and negative consequences. It reveals that the negative aspects outweigh the positive aspects. Indeed, it addresses whether the dependence of many small economies on foreign borrowing is consistent with long-run fundamentals or not. It is necessary to highlight the importance social security reform and the welfare aspects before reforming public pension systems.