Aging and economic growth: is there a role for a two-child policy in China?

Yong Liu

doi:10.1080/1331677x.2019.1699436

Abstract

The current study seeks to determine the type of population policy China should implement to effectively promote economic growth, especially in the context of its aging population. Using multiagent simulation technology, I integrate the two-child policy into a complex model featuring population, resources, and economic growth. My simulation results indicate that under the constraining effect of aging on economic growth, the implementation of a two-child policy alone could promote economic growth, albeit in a limited fashion: it would be more economically advantageous to combine a two-child policy with policy that promotes human capital growth. These findings provide new evidence regarding the relationship between population aging and economic growth. It is insufficient to emphasize only a liberalization of birth restrictions and promote population growth: rather, a combination of various policies would be more successful. A cluster of policies that aim to increase both fertility and investment in human capital can effectively curb economic recession otherwise caused by an aging population, and such a policy cluster could concurrently increase the supply of new labor and improve skills that appreciate with age.

Highlights

In recent years, there has been a surge of interest among researchers in the relationship between population aging and economic growth
The current study seeks to determine the type of population policy China should implement to effectively promote economic growth, especially in the context of its aging population
I integrate the two-child policy into a complex model featuring population, resources, and economic growth

Summary

Introduction

There has been a surge of interest among researchers in the relationship between population aging and economic growth. Various studies have shown that population aging can slow economic growth (Peng, 2005), and that a shrinkage in the proportion of the young, working-age population can lower the overall labor force participation rate. Some studies indicate that population aging does not necessarily delay economic growth (Fougere et al, 2009). China is a country with a large population, and so its population-aging trend is not unexpected. As of 2014, 15.53% and 10.06% of the population had reached the ages of 60 and 65, respectively. The growth rate of China’s working-age population has declined, and the absolute quantity of working age adults began to attenuate in 2015, resulting in a structural labor shortage (Fang & Wang, 2006). China faces the pressures that come with economic development

Methods

Results

Conclusion