Abstract
ABSTRACTDemographic transition due to population aging is an emerging trend throughout the developing world, and it is especially acute in China, which has undergone demographic transition more rapidly than have most industrial economies. This paper quantifies the distributional effects in the context of demographic transition using an integrated recursive dynamic computable general equilibrium model with top-down behavioral microsimulation. The results of the poverty and inequality index indicate that population aging has a negative impact on the reduction of poverty while its impact is positive with regard to equality. In addition, elderly rural households are experiencing the most serious poverty, and their inequality problems compared with other household groups and within-group inequality worsen with demographic transition. These findings not only advance the previous literature but also deserve particular attention from Chinese policy-makers.
Highlights
As the world’s most populous country, China is experiencing an increasing number of young people and declining fertility, which boost economic productivity, and this is taken as a demographic dividend
The scenarios with and without population aging are used to compare the impact of demographic transition so that we can get an idea of the relationship between population aging and income distribution
The results from the updated income from the microsimulation are introduced to the poverty and inequality index, and a general conclusion on the impact of demographic transition on income distribution is summarized
Summary
As the world’s most populous country, China is experiencing an increasing number of young people and declining fertility, which boost economic productivity, and this is taken as a demographic dividend. The total population is predicted to arrive at its highest point, which is 1.395 billion, in 2026, and the total labor force to decline by 2015 World Population Prospects (United Nations 2013). These projections imply that China’s demographic dividend will soon be exhausted (Wang and Mason 2004) and will turn into a demographic deficit with important adverse economic consequences (Peng and Mai 2008). In 1990, the income per capita for urban households was 1,516 yuan, which was 1.53 times that of rural households This urban and rural inequality increased to 2.75 in 2014. Is there any relationship between demographic transition and income distribution? What’s the impact of population aging on poverty and inequality? Future inequality in the context of demographic transition in the middle- and long-run period will be a salient issue in the near future
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