Demographic Change and Regional Economic Growth: A Comparative Analysis of Japan and China

Abstract

How demographic characteristics affect economic growth has long been a controversial issue. Because many countries have experienced a demographic transition, the effects of demographic change are of great interest. In the early stage of economic development, both fertility and mortality are high and stagnant. As a country develops economically, mortality, especially infant mortality, declines rapidly, causing the population to increase dramatically for a period. After a while fertility also declines. When the demographic transition is completed, both fertility and mortality are low and population growth levels off. The demographic transition causes significant changes in the age distribution of a population. At the beginning of the transition, the share of the working-age population decreases as infant and child mortality declines, causing the proportion of young dependents to grow. As fertility declines and babies born in the past enter the labor market, the share of the working-age population increases. The changes in age distribution have important implications for the labor force and hence the economy. Today, low fertility is a serious problem in Japan and China. Japan’s fertility declined rapidly in the 1960s after a post–World War II baby boom, and currently its fertility rate is less than the replacement level. China, which used to suffer from high fertility and rapid population growth, adopted policies to reduce its fertility, the most famous of which was the one-child policy. As a consequence, Chinese fertility dropped very rapidly and today is below the replacement level. In this chapter, we analyze the effects of demographic characteristics on differences in economic growth among the regions of Japan and China.