Contraception and the Celtic Tiger

Abstract

New cross-country evidence for 1965 to 1995 is presented on the link that runs from population change to economic growth. The estimates indicate that demographic change is a powerful determinant of income growth, operating mainly via the effect of changes in age structure. The estimates also indicate that the benefits of demographic change can be greatly magnified by a favourable policy environment. A case study of economic growth in Ireland suggests that the legalisation of contraception in 1980 resulted in a sharp decline in fertility and a sizeable increase in the relative share of the working-age population. This demographic shift, operating in conjunction with a favourable policy environment, can explain in large measure the birth of the Celtic Tiger. However, given demographic projections for Ireland, the Tiger’s roar may become less formidable as it continues to mature.