A Dynamic CGE Model Research On The Economic Impact Of Population Aging From The Perspective Of Endogenous Saving Rate

Almost world-wide phenomenon of population aging is extensively andprofoundly influencing the global economic and social life. In China, the first growthpeak will come in the period of "12th Five-Year Plan".Besides, the size of thecountry’s elderly population will double by2030. China’s population aging emerges inthe lower level of economic development and the imperfect social security system andwill further accelerate in adjusting the economic structure and changing the model ofeconomic development. Obviously, population aging will bring a tremendouschallenge to China’s future economic development.This article characterizes the impact of aging on economic growth by influencingsaving,capital formation and investment instead of choosing other channels, such asconsumption mechanism and labor supply mechanism in the previous researches andmakes saving rate endogenous in the CGE model to analyze in the general equilibriumperspective. First of all, this paper constructs econometric models,which tests theinfluence of population aging and other determinants on household saving rate, to getthe elasticity coefficient of endogenous saving rate equation endogenous in the CGEmodel. Based on this, this article makes saving rate endogenous in the CGE modelinvestment module for the first time. By introducing the different saving-investmentmechanism, this paper constructs flexible closures and simulations considering boththe effect of consumption and investment to analyze the possible impact of populationaging on future macroeconomic in China in the next40years from the two aspectswhich include the economic effects and structure effects.The result shows that：(1) The long-term decline in the total population and risein dependency ratio caused by population aging,through labor supply, consumption,savings, and other channels, to drive down economic growth. The main negativeeffects will be represented as the long-term pressure, that is, the investment gapbrought by the potential labor supply decline and the decline in the savings rate.(2)The rise in average consumption propensity will improve the current situation of lackof domestic demand, showing the positive side of aging population.(3) Due to thepositive role the consumption play, the negative effects of the aging of the populationwill not appear in the short-term; mainly comes from long-term pressure. It seemsthat the turning point of the potential economic growth will appear in2030and will drop the potential economic growth by2%in2050.(4) Changes in the population atthe same time bring the long-term inflationary pressures, the price index risesignificantly, leading to improve the terms of trade, reducing and reversing thecurrent situation of China’s current account surplus.(5) Economic structure hasshifted passively towards demand-oriented and service-based economy, and thepulling effect of export and investment are supposed to face challenges.(6)At industrylevel, the secondary industry affected negatively by exports, investment rate of returnwill face greater challenges.