The Impact Of Population Aging On Income Inequality In China

China's economy has been growing at a high speed for recent years,but the income gap between residents has been expanding.World Bank Database shows that China's Gini coefficient in 1998 is 0.403,2001 is 0.45,2004 is up to 0.47.It is true that income inequality is getting worse.At the same time,we can observe that this is a period of population aging,the percent of people aged 65 in total population is more than 7 in 2000,it says that China has become aging society.According to China statistical yearbook in 2016,the percent of people aged 65 in total population is 10.5 in 2015,more than world average level,China has been a developing country with a serious aging population.Population aging and income inequality are both obvious phenomena in China,whether population aging has an effect on income inequality.At present China is at the key period of economic development and demographic transition,studying this problem will help solve the challenge of population aging and income distribution.It is important to optimize population structure and adjust income distribution.Most of studies abroad use cross-country or national data to analyze the effect of population aging on income inequality,studies in China seldom use provincial data but to analyze based on rural areas or urban areas.Then,some papers just analyze that population aging has a positive or negative effect on income inequality,they don't know whether this effect is from top-aging or bottom-aging.At last,few studies analyze the population aging effect from the angle of different economic development levels and aging.Thus,the paper will complement this issue to reflect economic reality more objectively.This paper analyzes the effect of population aging on income inequality based on provincial level panel data of China over 1998-2014.Our empirical estimation result shows that population aging does increase income inequality significantly.Moreover,this impact is mainly from top-aging because income inequalities in different age groups increase with age.The estimation result of the control variables shows that income inequality and economic development have an inverted U relation.Foreign direct investment,urbanization,and human capital have a positive effect on decreasing income inequality.Improving the level of financial development or foreign trade will increase income inequality.The results are robust when we use instrumental variable method and system generalized moment method to solve potential endogenous problems and abnormal sample points.Population aging also has a greater impact on income inequality in those provinces with higher economic development levels and higher levels of aging.