The present study investigates the economic implications of demographic transition in case of Pakistan. We developed the growth and saving model by incorporating both life expectancy and old age dependency during the period 1972-2010 where most of the studies in Pakistan have overestimated these effects by incorporating life expectancy or old age dependency separately. Utilizing the bond test approach to cointegration, we find that change in the age structure of the population has significant impact on saving and economic growth in Pakistan. These effects of demographic transition on saving and growth mainly operate through Life Cycle Hypothesis and Overlapping Generation Models. We also find the positive but insignificant impact of population on growth per capita. However the impact of life expectancy on economic growth is found to be only long run phenomena. The findings of the study suggest that the life-cycle hypothesis of demography holds even in a country like Pakistan, where this model is likely to be less applicable due to the social and cultural environment. Therefore policies dealing with public health, education and labour market flexibilities should be designed and implemented to materialize the benefit from this demographic transition. Otherwise it might in fact be a curse, resulting in an increased unemployment and unbearable burden on health, education and old age security. Supervisor:-Dr. Abdul Qayyum