An Empirical Study On The Impact Of Population Aging On Income Disparity In China

Since the reforming and opening,China’s economy has made great achievements,and the income level of residents has continuously improved.However,it is also an indisputable fact that the income disparity is too large.Great income inequality seriously restricts the sustainable development of the national economy.On the other hand,China’s population structure has undergone significant changes in recent years,and the problem of population aging has become prominent.According to the related statistics,the population over 65 years old increased to 158.31 million in 2017,accounting for 11.39% of the total population,exceeding the world average level.The trend of population aging in China is irreversible and the process of population aging is accelerating.At present,China is in a critical period of economic transformation and population transition.Studying the impact of population aging on income disparity will help to alleviate the tough challenge of population aging on income distribution and provide guidance for formulating economic policies to narrow income disparity in the future.Based on this,this paper uses comparable micro-data and unconditional quantile regression and its decomposition to make an empirical study on the impact of population aging on income disparity.The article is mainly divided into six parts: the first part is an introduction,aiming at elaborating the background and significance of the topic;the second part is a literature review,which combs and summarizes the literature on the impact of population aging on income disparity and the research related to the decomposition of income disparity;The third part is the theoretical analysis,elaborating the theoretical mechanism of the impact of population aging on income disparity,and the other factors affecting the income disparity are also discussed;the fourth part is the situation analysis,which briefly describes the current situation of China’s population aging and income disparity;the fifth part is the empirical analysis.this paper firstly uses the unconditional quantile regression method based on the Recentered Influence Function(RIF)proposed by Firpo et al.(2009)to analyze the household data of CHIP1995 and CHIP2013,focusing on the heterogeneous impact of population aging on the income of different income quantile groups and the overall income disparity.Secondly,this paper divides the income disparity into factor endowment effect and factor structure effect,focusing on the effect of population aging on income disparity.The sixth part is the policy recommendations,relevant suggestions are putting forward according to the empirical conclusions.This study finds that ordinary OLS regression would conceal the difference of income distribution in different quantiles,and the unconditional quantile regression method can better estimate the impact of various factors on the heterogeneity of different quantiles of income distribution.In addition,the FFL decomposition method based on RIF regression can observe the contribution of individual characteristics in more detail.According to the results of unconditional quantile regression and decomposition,we can draw the following conclusions:(1)Population aging will decrease the income level,but the impact direction of population aging on income disparity is different in the two periods: in 2013,population aging will widen the income disparity;but in 1995,the impact of population aging on income disparity was not significant.(2)The result of income disparity decomposition shows that China’s income disparity is expanding from 1995 to 2013,and the factor structure effect is the main factor causing the widening income disparity.(3)Population aging has a positive effect on income disparity mainly through factor structure effect.That is to say,population aging enlarges income disparity by increasing the income of people in high-income quantile and reducing the income of people in low-income quantile.Because of individual heterogeneity,there are significant differences in income inequality among different groups.When the relative population size of the group changes,the overall income inequality will also change.If different groups are divided according to age,population aging will change the relative population size of different age groups,thus affecting the overall income inequality.This paper empirically tests the positive effect of population aging on income disparity,and puts forward some policy suggestions to alleviate population aging and narrow income disparity based on empirical conclusions.It has important reference value for how to adjust income distribution and population policy in China,which is in the process of rapid population aging.