Dependency Ratio Theory

Dependency Ratio Theory explains how the proportion of dependents—those typically too young or too old to work—relative to the working-age population affects a country’s economy. A high dependency ratio means more people rely on the working population for support, which can strain resources and reduce economic growth. Conversely, a low ratio indicates a larger share of active workers, potentially boosting economic productivity. This concept helps policymakers understand demographic challenges and plan for social services, pensions, and economic development strategies to maintain balanced growth.