HOW GLOBALIZATION IMPACT DEMOGRAPHIC TRANSITION

Abstract

This study investigates how various dimensions of globalization and socio-economic factors impact key demographic indicators, namely birth rate, death rate, and age dependency ratio. As countries transition through different stages of demographic and economic development, understanding the intricate interrelations between global integration, human capital formation, health outcomes, and fertility behavior becomes critical for evidence-based policy formulation. The research employs a Vector Autoregression (VAR) model to capture the dynamic, time-lagged effects of independent variables such as Foreign Direct Investment (FDI), trade openness, net migration, tertiary education, female labor force participation, urbanization, infant mortality, internet penetration, and GDP growth on demographic indicators. Additionally, Impulse Response Functions (IRFs) are used to simulate how sudden changes (shocks) in these factors influence birth rate trajectories over time, offering a deeper understanding of short-term versus long-term effects. Key findings indicate that net migration has a significant positive effect on birth rates due to the inflow of younger, reproductive-age individuals. Interestingly, tertiary education—often associated with fertility decline—shows a short-term positive impact, suggesting a “catch-up” fertility phenomenon once women attain economic stability. Infant mortality remains a strong predictor of higher fertility, reinforcing the insurance effect theory. Urbanization and trade openness are consistently associated with fertility declines due to structural lifestyle changes, rising opportunity costs, and modern values favoring smaller families. FDI shows delayed but significant fertility-reducing effects, likely mediated through labor market restructuring, increased female employment, and social modernization. Internet penetration, while theoretically influential, shows only mild and statistically insignificant effects in the short run, suggesting the importance of complementary social and educational policies. GDP growth alone is not a direct driver of fertility change, emphasizing the role of inclusive development and institutional quality. The IRF analyses further reveal that demographic changes influence economic variables in return. Rising fertility initially deters FDI and trade, while fertility decline due to education and female labor participation supports long-term economic competitiveness. Urbanization leads to persistent fertility reductions and economic reorientation, while aging populations reduce FDI inflows, trade engagement, and GDP growth due to labor shortages and increased fiscal pressure. However, aging can temporarily boost net migration and female employment in the short term as adaptive policy responses are implemented. The study’s findings are crucial for designing integrated, forward-looking policies in the areas of education, migration, gender equality, healthcare, urban planning, and economic globalization. Future research should extend this framework using panel data across countries, disaggregated age-group analysis, and machine learning models to detect nonlinear effects and identify policy thresholds. Exploring the role of cultural norms, social protection policies, and environmental constraints could further enrich the understanding of demographic transitions in an increasingly interconnected world.