The Positive Effects Of Population Aging On China’s Economic Growth

The aging of population has become a common problem for most of countries in the world. The change of age structure could be caused by changes in fertility and mortality in a relatively long time period. Generally, different age population plays a different role in the economic activities depending on various economic behaviors. According to the impact of demographic factors on economic growth, the "window of opportunity" is very important for developing countries. At this stage, the developing countries can achieve rapid economic development using relatively lower labor cost advantages. China is the most populous country in the world. It is well accepted that, over past three decades, the rapid economic development in China has depend on sufficient labor resources, to a great extent. However, China will gradually lose the advantage of labor force in near future. According to the standard of aging population, China has entered the aging society in 2000. A big concern is that China’s economic growth would face big challenges due to the aging population. Many existing studies focused on the impact of population aging on economic growth and solutions, but few have paid attention to the opportunities that population aging could bring to the Chinese economic growth. Therefore, investigating the positive effects of population aging on the Chinese economic growth is significant a theoretically, and would be beneficial to China’s economic structure optimization and the sustainable economic growth.This dissertation attempts to investigate the positive effects of population aging on economic growth by analyzing human capital, technological progress, and industrial structure. At first, the research is based on the related literatures, confirm the population aging will bring some negative influence on economic growth, then focus on the trajectory mechanism of the economic growth which take advantage from population aging. The negative effects of population aging were summarized as followed:(1) Population aging will affect the labor market supply and demand. The working age population will decrease and age structure of the labor force will age and the labor force participation rate will dropping in the labor market; all those could cause the change of supply and demand in the future labor market;(2) Population aging will reduce saving rate. On the one hand, According to the life cycle theory, a person will smooth his consumption in the whole life cycle, while his production is mainly concentrated in the 20 to 65 years old stage. That means old population’s contribution is to be a consumer, and working population contribute more savings. If saving motives remain unchanged, with the increasing proportion of aging population, the saving rate will fall. On the other hand, increase in the number of aging population, inevitably raise government public expenditure, including pension, medical and health spending, thereby reducing the other public expenditure of the government.(3) The population aging will lead to the disappearance of the advantage of low cost of labor intensive industry. Due to the aging population, the number of labor force will decrease and labor costs will raise, which could directly affect the sustainable development of labor-intensive industries.Then, the dissertation analyzed some positive effects of population aging on economic growth from the perspective of human capital, technology progress and industrial structure. The major findings include:(1) the aging of the population could promote the human capital investment(detail in Chapter 4). The ways of effects as follows: first, the population aging may lead to labor supply reducing, rising wages, material capital investment return rate decreasing, while the human capital investment return rate will increase and the feedback signal will result in the promotion of human capital investment. Second, the population aging could extend the payback period of human capital investment, which it is helpful for the improvement of human capital investment. Third, when fertility rate decline, selfish old generation will improve education investment to offspring, in order to win more transfer payment from young generation. According to the different path of influence, this dissertation uses two forms of OLG model with human capital investment(i.e., the autonomous decision-making model and the intergenerational transfer model) to investigate effects of population aging on human capital investment. The results showed that, whether in the autonomous decision-making model or in the intergenerational transmission model, population aging will promote the investment of human capital, which have beneficial impacts on economic growth. In the decision-making model, the feedback signal of increasing return rate and extending payback period of education investment will encourage people to increase education investment time. While in the intergenerational transmission model, the feedback signal of increasing return rate of education investment and increasing proportion of transfer payment in family will make the parents increase the educational investment to young generations. Further analyses suggested that there is a typical phenomenon of wasting elderly human resources due to the lower statutory retirement age in China. Then, we analyzed how to fully develop and utilize the elderly human resources and discussed the variety of social security policy of the government.(2) The population aging can promote technology progress. The analysis in the chapter 5 of this dissertation shows that the population aging will promote technological progress through three ways: first, population aging will promote technology progress through a forced mechanism. With the population aging, labor costs will continue to rise, and profit- maximizing enterprises will replace the labor force with capital and technology and also increase investment to carry out labor-saving technological innovation. Second, population aging will cause technological progress by the improvement of human capital. The aging of the population can increase the investment of human capital; the higher level of human capital provides strong conditions to promote technological progress. Three, population aging will cause technological progress by the diverse needs. The age structure changes will cause the change in needs structure and demand structure diversification will guide the progress of technology.(3) The population aging can optimize the industrial structure, thus promote the transformation of economic structure. The analysis in the Chapter 6 showed that the effects of population aging on industrial structure were controlled by the following two ways: first, the structure of production factors change could drive the upgrading of the industrial structure. With the aging of the population, changes in labor force price could make the structure of production convert from labor-intensive to capital and technology intensive, and change the structure of production factors. This will drive the transformation and upgrading of the industrial structure, thus promote the transformation of economic structure finally. Second, population aging will create new “pension industry”, it is greatly helpful for the industrial structure and economic structure transformation. According to the analysis of the dissertation, the large number of aging population can provide great potential demand, but the development of pension industry is relatively underdeveloped. So there is a big space for the development of the pension industry in China. The vigorous development of the pension industry will not only promote the transformation and upgrading of the industrial structure of our country, but also provide a new driving force for the sustainable economic development in China.The innovations of this dissertation are as followed: first, most existing studies focused on the negative impacts of population aging on economic growth, while this study attempts to investigate the positive effects by analyzing three items, i.e., human capital, technology progress, and industrial structure; second, the dissertation adopts two different theoretical models to analyze the effects of population aging on human capital investment; third, this dissertation adopts a forced mechanism to explain how the structural change of production factors could promote the technology progress and industrial structure adjustment.