Research On Fiscal Policy In China:under Demographic Aging

Demographic aging, resulting from the decline of social birthrate, prolong of population longevity and worldwide human migration etc., is the common stage and inevitable trend for the development of human community. Since the year of 2000, China has suffered from the problem of population aging and there exist many researches to address it from the theoretical prospective and practical prospective. As we can see, the problem of population aging for China is more and more deepen in 21 st century, at this case, if the problem cannot be effectively handled, it would surely hurt our country in the fields of social development, government revenue and income distribution.Simply speaking, the main reason for the problem of population aging is not that the absolute amount of old people goes up, but that the share of old people in the whole population rise up gradually. The problem yields not only the pension issue, but also the coordinate development for the whole nation and the welfare distribution between the intra-generation and the inter-generation. To address the problem, it is ineffective for the single adjustment of population policy, but we deeply need that the whole public policies can be pushed to systematic reform, and that every economic agent can work together under the instruction of government.Fiscal policy, which is an important tool for government to regulate the economy, to supply the public goods and remedy the failure of market, can do well in the fields of government goal, development of economy and the construction of harmonious society. Focusing on the systematic reform of fiscal policy, this paper starts from the prospective of public governance of government, and make a break through to find a way to combine the acceleration of economic development and the solution of the problem of population aging.In a theoretical view, there are binary relationships among population aging, fiscal policy and economic growth. In a realistic view, developed countries in western world suffered from the problem of population aging prior to other region, and nowadays the problem in western region is the most serious. So we want to know how to handle the problem for the developed countries and whether they efficiently handle it. About before 15 years, China begun to face the problem of population aging, we want to study whether there exists a similar logic and common trend for our country among three factors stated above in this period, and also there are many interesting questions we want to answer, such as how fiscal policy affect economic growth under the background of population aging, how to implement the reform of fiscal policy and balance the acceleration of economic growth and efficiently address the problem of population aging for a government, and what are the short-term policy and long-term policy for government in the reform of fiscal policy, and so no.Based on the stylized facts and situation of policy implement stated above, this paper applies theory of human capital, theory of public goods and public finance to form our theory basis, and consider the reform of fiscal policy to be our main line. In this paper, based on a thorough, objective review of practical solution by developed countries to address the problem of population aging, we firstly summarize the revolution history for our fiscal policy for handling the problem of population aging; secondly we analyze the relationship between the fiscal policy and economic growth from the views of theory and empirical under the background of gradually rise in population aging; finally we choose short-term policy and long-term policy by a effective mechanism design to target on the goal of government which could be stated below: deepen the reform of fiscal system, improve the regulation system of government, accelerate the economic development, address the problem of population aging and form a good coordination for the above factors, and so on.This paper applies qualitative method for analysis, and the result shows that since the year of 2000, economic growth is positively impacted by the level of population aging, the scale of government purchase, the input scale of education and health care. To be more detail, the result can be divided into four points of views: firstly, the level of population aging in China lies in its primary stage, and is not serious enough to affect the social accumulation of human capital; secondly, the expansion of the scale of government purchase can efficiently push national consumption and stimulate China’s economy; thirdly, the expansion of the input scale of education and health care can accelerate the skill of worker and facilitate the accumulation of human capital, then push China’s economy.This paper uses quantitative analysis to study the binary relationships between the level of population aging, the scale of government purchase, the input scale of education and health care and economic growth. We adopt two steps in our research: step one, we apply static panel data model to estimate all parameters, and the result we get shows that except that the input scale of education is negatively influence economic growth(coefficient is-1.1511%), other factor yields positively impact; step two, to test the robustness, we introduce first order lag term of the rate of GDP growth to be explanatory variable and build a dynamic panel data model, the estimate results are similar to static panel data model, then we can say the analysis in quantitative part is robust.The results we get in this paper suggest five advices. Firstly, the fiscal policy, which is seeking for economic growth under the background of deepening population aging, government increase purchase to motivate the potential of “money-base economy”. Secondly, in order to deal with the demographic aging effectively, the reform of fiscal policy should choose the mode of pension in a reasonable mean(in a short term, family pension dominate other way, but in a long term, it is necessary to develop community pension and institution pension). Then, the short-term choices for fiscal policy can be divided into two parts: part one, the scale of government purchase should be satisfying for its moderate level, optimal structure and remarkable effectiveness; part two, government should push the reform of individual tax and estate tax, increase the subsidies and develop the multiple pension system. Thirdly, the long-term choices for fiscal policy are that government should develop a tax frame for pension issue which consists of tax of heritage and donation. Finally, the skill of governance for government is the base for the reform of fiscal policy system.The innovation of this paper can be summarized below:On the one hand, the prospective of this paper is very novel. Under the belief saying as “public finance forms the base stone for the management of government”, this paper, starting from the view of public governance and focusing on the fiscal policy, deeply study the problem of population aging, and the research suggests that we should target at the goal of pushing economy and handling population aging, and balance the short-term choices and long-term choices when we take fiscal policy.On the other hand, the method we apply is creative. In this paper, we adopt Demology, Economics and Sociology to examine the causal relationship among population aging, fiscal policy and economic development in two dimensions: static dimension and dynamic dimension.