China's Rural-Urban Age Structure, Sectoral Employment and Economic Growth

Abstract

This paper focuses on two major elements of China’s population dynamics – the rising proportion of workers in the population and the shift of rural workers from agriculture to industry and services – in a provincial-level analysis of per capita income and productivity growth during the last three decades. We measure the mechanical contributions of these dynamics to per capita income as revealed by growth decompositions, before assessing the deeper population determinants of per capita income and productivity in a series of growth regressions. Our results indicate that lower levels of rural dependency and the sectoral shift in employment have both made significant positive contributions to per capita income and aggregate productivity growth. However, the negligible impact of China’s changing age structure combined with the negative impact of changing sectoral employment on industrial productivity growth suggest that the benefits of these population dynamics to China’s economic performance have been overstated.