Demographic Dividend: Supply-side View and Evidence on Chinese - - PowerPoint PPT Presentation

Demographic Dividend: Supply-side View and Evidence on Chinese Growth

CAI Fang Chinese Academy of Social Sciences

• 1. Fast Growth alongside Rapid

Demographic Transition

Very Low Fertility for Many Years (and two features)

1 2 3 4 5 6 7 8 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 TFR

N at i onal U r ban R ur al

Age Structure Changes Faster (WAP rise & dependence decline)

12 10 8 6 4 2 2 4 6 8 10 12 0- 4 10- 14 20- 24 30- 34 40- 44 50- 54 60- 64 70- 74 80+

2000

P R C Less devel oped r egi ons 12 10 8 6 4 2 2 4 6 8 10 12 0- 4 10- 14 20- 24 30- 34 40- 44 50- 54 60- 64 70- 74 80+

2010

P R C Less devel oped r egi ons

Decomposing China’s Growth (preventing diminishing return on K)

R esi dual 16% C api t al 61% Labor 9% E ducat i on 6% TFP 24% R eal l ocat i on 8%

High Potential + Strong Demand = Fast Actual Growth

2 4 6 8 10 12 14 16 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 G D P gr ow t h r at e ( % )

Act ual Pot ent i al Aver age

• 2. Disappearance of

Demographic Dividend

Reversed Demographic Factors (WAP shrinks & dependence rises)

Working age population Dependence ratio

10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Working age population (10 thousand) 10 20 30 40 50 60 70 80 90 100 Dependence ratio (%)

As Result, One, Return on K Decreases, Estimated by Various Studies

• 0. 10
• 0. 15
• 0. 20
• 0. 25
• 0. 30
• 0. 35
• 0. 40
• 0. 45

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

G uo B ai M P K ( 变) M P K ( 0. 55) G

• ng

Two, L Becomes Scarce and Wage of Unskilled Workers Increase

500 1000 1500 2000 2500 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Years Monthly wages (yuan) 10 20 30 40 50 60 70 80 Daily wages (yuan) M i gr ant s M anuf act ur i ng C

• nst r uct i on

G r ai ns C

• t t on

Pi g f ar m

Three, Room for Reallocation Efficiency (TFP) Becomes Smaller

Agr i cul t ur al N

• n-

agr i cul t ur al

100 200 300 400 500 600 700 800 900 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Labor f or ce ( m i l . )

Finally, Potential Growth Rate Slows Down and Slowdown Will Continue

• 6. 2
• 7. 6
• 10. 3

2 4 6 8 10 12 14 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Annual pot ent i al gr ow t h r at e ( % )

Per i od Annual

• 3. From Demographic Dividend

To Reform Dividend

Since It Is Supply-side Factors Cause Slowdown, PGR Can Be Increased

• 3. 0
• 3. 2
• 3. 4
• 3. 6
• 3. 8
• 4. 0
• 4. 2
• 4. 4
• 4. 6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

R eveal ed com par at i ve advant age i ndex

By Reforms to Increase Labor Supply, Human Capital, TFP, & Hopefully TFR

10 20 30 40 50 60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

P

• pul ati on share (%

) H avi ng urban resi dence Li vi ng i n ci t i es

Future Scenarios of Potential Growth Rates under Dif. Assumptions

3 4 5 6 7 8 9 10

2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049

Y ear s P

• t ent i al gr ow

t h r at e ( % )

Basel i ne Scenar i o A Scenar i o B Scenar i o C

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