How does death rate affect an economy?

Answer 1

To some extent the answer depends on who is dying. If it is retired people who are dying then, in many countries, the dependency ratio will fall. This is a measure of the number of people that the working population is supporting. This means that the non-productive part of the population is reduced which increases labour productivity. Also, children supporting their elderly parents will then have a greater disposable income and so, with the multiplier effect, will boost the economy.

Increases in the Death Rate of the working population will reduce the labour force. This will increase the employment rate and could result in wage inflation. At its most extreme, it could lead to an economy which is not viable because the work force is too small.

If it is youngsters who are dying then there is the danger of a future explosion in the dependency ratio: not enough people in the work force trying to support too large a population.

In each case reductions in the death rate will have the opposite effects.