A Study Of The Effects Of Population Age Structure On The Household Consumption In China

China has experienced a long-run decline in the ratio of household consumption to GDP in the last decades, This dissertation aims to investigate whether or not the population age structure(PAS)is an important factor that leads to the low ratio of household consumption to GDP. Firstly,it summarizes the changes in PAS in China. Secondly, it examines the various transimission mechanisms how PAS affects household consumption. Finally, it tests the empirical relationships between PAS and the household consumption.Descriptions of differences in both time and space are given about the characteristics of changes in PAS since the foundation of P. R. China. Firstly, the evolutionary stages of PAS in China are divided into three segments which are Young Stage(from the year of 1949-1964), Mature Stage(from the year of 1965-1999), and Old Stage(since the year of 2000). Secondly, the diversity of the development of PAS among China is presented using the old dependency ratio during the period of 1989-2005.Basically, the developed regions have entered a period of faster ageing than the less-developed regions. While other regions still remain in the young stage of PAS.PAS affects household consumption through different mechanisms. In the short run, the fertility shock will increase population and makes the young dependency rate higher. In the long run, it will cause the employment shock and the ageing shock. For the employment shock, on the one hand, it keeps the household consumption higher because of the low dependency rate, and it also leads to more aggregate output due to more labors; on the other hand, the employment shock makes the household consumption lower in the long run because of the lower per capita capital-stock and lower real equilibrium wages in the labor market. For the ageing shock, it will increase the household consumption in the short run, but it will also imply less labors which make aggregate output and the household consumption lower in the long run. If the ageing shock triggers advances in technologies, both aggregate output and the household consumption are less likely to decrease. Some Asian countries or regions like Japan, the Asian"Four Small Dragons", and mainland China, enjoyed a quick economic growth during their demograhic windows of opportunity. So economic growth causes the household consumption to increase at differet paces in different countries or regions. It seems that demographic dividend does not have a significant and positive correlation with the household consumption if we consider the low ratio of the household consumption to GDP in China.About the effects of the first development stage of PAS, that is the fertility shock, on household consumption, this dissertation uses time series data for the period of 1952-2004 in China and conducts cointegration regressions with three variables, which are real household consumption, real GDP, and natural population growth rate. The results show that natural population growth rate plays a significant and positive impacts on the household consumption both in the long run and in the short run. This suggests that the decline in natural population growth rate led partly to the decline in the ratio of household consumption to GDP in China.Because natural population growth rate has nearly reached the bottom of its stage, it is expected that it would play a limited impact on the household consumption in the near future if the One-Child Policy is still maintained.With regard to the effects of the second development stage of PAS, that is the employment shock, on the household consumption, this dissertation also uses the time series data for the period of 1952-2004 in China and makes cointegration regressions with four variables, which are real household consumption, real GDP, natural population growth rate, and emloyment rate which is measured by employment population to whole population. The difference between the fourth and fifth chapter is a new addition of employment rate in the regression equation in the fifth chapter. This will help test the effects of employment rate on the household consumption. The results show that there is a significant and positive relationship between the natural population growth rate and the household consumption, but there is not a significant relationshiop bewteen employment rate and the household consumption both in the long run and in the short run.About the effects of the third development stage of PAS, that is the ageing shock, on the household consumption, this dissertation employs the provincial panel data and conducts a dynamic panel data GMM regression. Especially it separates the impact of the young dependency rate on household consumption from that of the old dependency ratio. The results show that the youth dependency ratio has a negative but small impact on the household consumption, while the old dependency ratio does not have a significant impact on the household consumption. Hence changes in PAS can not explain the low ratio of the household consumption to GDP in China.These empirical results above are consistent. They suggest that there is not a stable relationship between PAS and the household consumption in China. It is not accepted that changes in PAS contribute to the decline in the ratio of the household consumption to GDP. But the natural population growth rate is an important factor which leads to the decline in the ratio.