Dependency ratio is the proportion of the population that is outside the labour force and thus dependent on the economic activity of those working. The dependency ratio is an age-population ratio of those typically not in the labor force and those typically in the labor force.
Dependency ratio is typically calculated as the proportion of the population between the ages of 0 to 16 plus those over 65 to those between the ages of 16-65. The dependency ratio is a statistic that has been used extensively by demographers, economists and policy analysts to portray the impact of population aging.
Dependency ratio has also been widely used as evidence for the argument that an aged population will cause both economic crisis and intergenerational warfare for developed nations. Few critiques of dependency ratio's value as a reliable indicator of future trends, however, have been conducted. In this analysis, the appropriateness of such projections about the future of the economy in developed nations, and the burden of caring for an aging population, are considered.
A deconstruction of the components of the dependency ratio suggests that its assumptions about the relationship between people, age and productive labor, raises important doubts about the likelihood that forecasts of crisis will be correct. - Deconstructing Aged Dependency: An Assessment of the Dependency Ratio as an Indicator of Population Aging - Donoghue, Chris - Abstract
It is argued that further advances in the usefulness of the age dependency ratio will be made only if we begin to take into account changes in economic productivity and real income. - Donald E. Gibson, University of Pittsburgh at Greensburg - Research on Aging, Vol. 11, No. 2, 147-157 (1989)
Some Thoughts on Reformulating the Dependency
Crown, William H. - Gerontologist, v25 n2 p166-71 Apr 1985
Abstract: Develops and applies methodology for systematically examining dependency of alternative demographic groups within the context of total dependency ratio using Bureau of Census and Bureau of Labor Statistics data. Although total dependency ratio increases as population ages, those under 16 will continue as the largest dependent group in future years.
The Dependency Ratio Controversy
Geary, Roy C. (Economic and Social Research Institute (ESRI))
Dependency Ratio, Foreign Capital Inflows and the Rate of Savings in Pakistan
Ashfaque, Lubna Hasan, Afia Malik - Pakistan Institute of Development Economics
The Pakistan Development Review, Vol. 4, No. 31, pp. 843-856, 1992
Abstract: Domestic resource mobilization is one of the key determinants of sustained economic growth. The savings rate in Pakistan is sensitive to per capita income, dependency ratio, real interest rate and foreign capital inflows. Dependency ratio and foreign capital inflows exert a depressing effect on savings while income and real interest rate have a positive effect.