Does Demographic Dividend Enhance Economic Complexity: the Mediating Effect of Human Capital, ICT, and Foreign Direct Investment

The demographic dividend can provide favourable conditions for economic diversification and technological advancement, which are key drivers of economic complexity. However, empirical studies that uncover the nexus between demographic dividend and economic complexity are lacking. This study examines how demographic dividend contributes economic complexity in 27 African countries for the period 1996–2017. Using Driscoll-Kraay standard errors and IV-GMM to address cross-sectional dependence and endogeneity issues, the empirical results show that demographic dividend contributes positively to economic complexity. The results also show that resource rents and internal conflict are negatively associated with economic complexity, whilst human capital and ICT enhance it. Lastly, the findings indicated that FDI, human capital, and ICT are channels through which demographic dividend affects economic complexity. Policies which can help maximise the benefits of the demographic dividend to promote economic complexity are suggested.