| The 21st century is the century of population aging. Population factor as a basic variable has an important impact on society and economy. According to demographic forecasts, in the 21st century China will face severe challenges posed by population aging. How will it impact China's economic growth? There is, however, little systematic research addressing this problem. By reviewing the literature at home and abroad, we found that the impact of population aging on economic growth is nonlinear, with both positive and negative impact. Therefore, on the basis of theoretical analysis we built an econometric model, and did an empirical study on the impact of population aging on China" economic growth using macroeconomic data.Before examining the impact of population aging on economic growth, we first studied the mechanism of population aging, the result of which is presented in chapterâ…¢. This is the first study into the mechanism of population aging system, which is of great significance for further understanding the theory of population aging and the economic impact of population aging. This paper approached the mechanism of population aging from the perspective of declining fertility and revealed that aging, once formed, will continue to reinforce itself. It is proved theoretically that the Chinese society will be a continuously aging society in the future. Accordingly aging is an important constraint on China's economic growth.Then, we introduced elderly dependency ratio, a variable of aging, into production including human capital, and derived the total production function. Using this analytical framework, we empirically studied the effects of aging on each variable of the production function, including the effect of aging on labor productivity, saving rates and human capital investment.Population aging causes the workforce's aging, but it is a controversial issue that whether or not workforce's aging affects labour productivity. On the basis of a method previously described by Lindh and Malmberg (1999), with the introduction of population age structure into the production function containing human capital, we derived an econometrical model shown in chapterâ…£. According to a technique developed by Bruno (1968) we used the average productivity of age groups to reflect the marginal productivity, and studied the impact of aging on labor productivity using 2000 and 2005's urban cross-section data of China. This is the first attempt to use macroeconomic data to study the impact of aging on labor productivity between different age groups and population by combining theoretical and empirical study. We found that the potential productivity of labor is of inverted U-distribution over age. When the other conditions remain unchanged, the aging of the labor force caused by the aging of the age structure of society will reduce labor productivity. However, besides the potential productivity, actual productivity is also related to the mechanism of labor utilization. The mechanism of labor utilization is defined as the distribution of resources and opportunities between different age groups, including labor force participation rate, labor utilization direct and retirement system. China's age structure of labor force participation is not reasonable. The age group over 45 years old has great potential productivity. Therefore, to improve the age structure of labor force participation and make better use of the labor force of the age group over 45 years old can reduce aging's negative effects on productivity.Compared to other countries, China has a high national saving rate and a unique sector saving structure. Along with the aging process child dependency ratio declines and elderly dependency ratio goes up, exerting different effects on saving rate. In chapter V, based on the simple econometric model and the VECM model and with the use of 1978-2008 time series, we selected variables to study the dynamic effect of child and elderly dependency ratios on long-term national and sectoral savings. This is the first study on the effect of population aging on sectoral savings; the long-term dynamic analysis method is also innovative. The study concludes that child and elderly dependency ratios can have a negative impact on national and household savings for up to 20 years, and that child dependency ratio's effect is about three times that of the elderly dependency ratio. In contrast, the effect of dependency ratio on government savings was insignificant. Corporate savings has a short-term positive effect on the rise of the elderly dependency ratio. Since China initiated the reform and opening-up policy, a dramatic decline in child dependency ratio is an important reason for China's high savings. In the future aging process, the rapid increase of the elderly dependency ratio will reduce the level of savings, but the decline will be less than the level of rise of savings caused by the reduction in the child dependency ratio. Therefore, the current negative impact of population aging on savings is not significant, in the future it will lead to reduction of the level of savings, but savings rates will remain at a high level.Investment in human capital includes two parts, education and health investments, of which investment in education accounts for a greater share. Human capital investors are the government and the household. In chapter VI, based on theoretical analysis and the study of experience abroad we built an econometric model using time series over 1978-2008 of the national educational funds and health expenditure and the panel data of provincial expenditure for education over 1995-2008. With this model, we studied the effect of changes in elderly dependency ratio on the government's and the household's human capital investment over the two different spatial scales of state and province; we also studied the impact of the country's medical expenses on education investment. This represents the first attempt in China to explore the impact of aging on human capital investment. The present study found that education investment and health investment promote each other, with a correlation coefficient of 0.996. The current aging of the population promotes government and household investment in education, but we also noted that government spending on health care and expenditure on education are competitive; and when budgets are constrained, household medical expenses will be squeezed by investment in education. Therefore, the current aging promotes investment in human capital. As population aging becomes more pronounced, the role of aging in promoting investment in human capital will be reduced by the influence of the relation between medicaland educational expenditures by the government, and may be changed from positive to negative.Taken together, China's national savings ratio is still increasing due to the decline in child dependency ratio, and the negative effect caused by the increase of elderly dependency ratio is not significant; the negative effect of health care and pension costs caused by increase in elderly dependency ratio on investment in human capital is yet to be felt:and labor force participation rate of population over 45 years of age is still very low, leading to unremarkable effect of high age group on labor productivity. Therefore, the current population aging has no remarkable negative effect on China's economic growth. The relationship between population aging and economic growth corresponds to an inverted-U curve, and at present china is on the left side of that.
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