Population Aging And Household Consumption In China

The sixth census data show that China’s aging process gradually accelerates. China’s aging has its own unique characteristics. The process of aging occurs far earlier in our country’s development than has been the experience in the industrialized world. Old before getting rich is its main features. In addition to the insufficient resources for supporting the elderly and pension system that is still under construction, one of the major concerns about the impact of aging on economic development. In Modigliani and Brumberg’s life-cycle model, Increase in the proportion of older people will increase the saving. But the reality is the opposite. Increase in the proportion of older people decrease the saving. This is called retirement consumption puzzle in academic circles. Insufficient consumption has been one of the bottlenecks of the problem in China’s economic development and social progress. So population aging is of particular relevance in China-a country eagerly seeking to rebalance its economy towards domestic consumption.This article use Modigliani and Brumberg’s life-cycle model as the theoretical basis. We add the old-age dependency ratio and child dependency ratio to the model and get the conclusion that old-age dependency ratio, child dependency showed a positive correlation between the consumption rates in the case of the other conditions established. Then we test it with the empirical model.This paper conducts a dynamic panel analysis of the impacts of population ageing on household consumption using panel data from29Chinese provinces during the period1996—2009. And use rural and urban data to analyze the impact of population aging on the consumption structure of China respectively. Simultaneously this paper analyzes the different affect of population aging in the east, centre and west of China. The results suggest that the youth dependency ratio has a significant negative impact on the household consumption, while the old dependency ratio does not have a significant impact on household consumption. The youth dependency ratio has a significant negative impact on the household consumption in rural and urban areas. While the old dependency ratio does not have a significant impact on household consumption in urban areas and have a significant impact on household consumption in rural areas. Hence the population ageing structure cannot explain the lack of household consumption in China strongly. But the pace of the elderly support burden has only just begun. The speed accelerated from2010. In the future, the influence of old age support burden change on consumption is worth further attention. The rise of old-age dependency will increase the medical treatment, cultural entertainment and living expenses and decrease the food and clothing, household devices expenses. The effect on traffic spending is not certain. Drop of the youth dependency ratio reduces the consumption ratio significantly in the west and centre of China. The old dependency ratio only has a significant effect on consumption ratio in the west of China.The research helps us to understand the Population age structure change on the influence of China’s economy running macroscopically. The drop of labor burden will not only affect the consumption of microscopic family directly, and it will through the family consumption to influence the whole social spending, thus influence macroeconomic operation. Under the background of global economic crisis, the export decline sharply. Raising domestic demand is of great significances to boost the Chinese economy. With the accelerated aging, the old age support burden will rise fast. The effect on the development of China’s economy is worth further attention.