The Economic Effect of Population Policy in China: Based on OLG Model and Panel Data Analysis

Abstract

Based on the two-period overlapping generation( OLG) model and the panel data from 1983 to 2012 of 30 provinces,this paper investigates the impact of China's population policy on the economic growth and the social welfare. The model analysis and the empirical investigation results consistently indicate that the past 30 years the implementation of the family planning policy prominently promoted the growth of average per capita income. Nevertheless,it gave rise to the trend of the population aging,causing the shortage of the potential endowment resources and elderly welfare loss. The simulation of the population movement in the next 70 years based on the 2010 population census data reveals that the"selective two-child policy"will have little impact on the trend of aging population structure,while the general two-child policy will ameliorate and stabilize China's population structure in the future. This will play a crucial role in many aspects such as the stability of the labor supply,the providing for the aged,and the preschool education,and thus boost the sustainable and coordinated population,economy and society development. Accordingly,we come up with the propose that it is necessary and urgent for China to consider the implementation of the general two-child policy immediately.