The People’s Republic of China’s 40-Year Demographic Dividend and Labor Supply: The Quantity Myth

Abstract

During the past 40 years, the economy of the People’s Republic of China (PRC) has achieved miraculous growth, a significant part of which many have attributed to its favorable labor supply resulting from the country’s “demographic dividend”–that is, a relatively large share of the working-age population in the total population (WAPS). Currently, this dividend is slipping away, and many in the PRC are very concerned. Against this background, I set out to examine the contributions of various dimensions of the PRC’s changing WAPS and its impact on economic growth. I show that between 1982 and 2015 the increase in WAPS was offset by a decline in the labor force participation rate, resulting in a very limited increase in the quantity of the labor supply. I then estimate the association between regional variations in economic growth and changes in factors such as population size, WAPS, migration, and education. The results lend little support to the view that an expanding WAPS played a major role in the PRC’s economic growth over this period.