Abstract
This paper aims to clarify how and to what extent the demographic dividend has affected China’s economic growth. China has experienced rapid demographic transition since the 1970s, as the working-age population has increased, and the dependent population ratio has decreased. Such demographic transition provides favorable conditions for economic growth, thereby producing economic fruits referred to as the "demographic dividend", which are considered to include two economic effects: the “labor effect” and the “capital effect”. The results of previous studies and a simple analysis of macro data confirm that China’s demographic dividend long exerted more of a "capital effect" on economic growth than a "labor effect". In other words, the decreasing dependent population ratio elevated the savings rate, and the increasing working-age population increased total savings, which were used for investment in physical capital. The growth of physical capital was the main engine for China’s economic growth. However, in the 2010s, the decreasing working-age population and the increasing dependency ratio reduced the savings rate and lowered the capital formation rate. The "capital effect" of the demographic dividend is no longer a strong driving force of the Chinese economy.
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The data were derived from the following resources available in the public domain: https://data.stats.gov.cn/english/, https://www.rug.nl/ggdc/productivity/pwt/
Notes
Taiwan, Hong Kong and Macau are not included.
The five-year moving average is taken to clarify the trend of each term. Without taking the moving average, it is confirmed that the sum of each term in the right-hand side of Eq. (2) is equal to the left-hand side in each year.
Final consumption expenditure includes both household and government consumption expenditure.
Gross capital formation includes both gross fixed capital formation and changes in inventories.
The five-year moving average is taken to clarify trends.
The five-year moving average is also taken for these values.
The data of disposal income and savings for only the period after 2000 are provided by the National Bureau of Statistics of China.
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Taketoshi, K. How and to what extent has the demographic dividend affected China’s economic growth?. IJEPS 14, 337–350 (2020). https://doi.org/10.1007/s42495-020-00040-3
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DOI: https://doi.org/10.1007/s42495-020-00040-3