[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/hka/wpaper/2019-030.html
   My bibliography  Save this paper

Demographic Aging, Industrial Policy, and Chinese Economic Growth

Author

Listed:
  • Michael Dotsey

    (Federal Reserve Bank of Philadelphia)

  • Wenli Li

    (Federal Reserve Bank of Philadelphia)

  • Fang Yang

    (Louisiana State University)

Abstract
We examine the role of demographics and changing industrial policies in accounting for the rapid rise in household savings and in per capita output growth in China since the mid-1970s. The demographic changes come from reductions in the fertility rate and increases in life expectancy, while the industrial policies take many forms. These policies cause important structural changes; first benefiting private labor-intensive firms by incentivizing them to increase their share of employment, and later on benefiting capital-intensive firms resulting in an increasing share of capital devoted to heavy industries. We conduct our analysis in a general equilibrium economy that also features endogenous human capital investment. We calibrate the model to match key economic variables of the Chinese economy and show that demographic changes and industrial policies both contributed to increases in savings and output growth but with differing intensities and at different horizons. We further demonstrate the importance of endogenous human capital investment in accounting for the economic growth in China.

Suggested Citation

  • Michael Dotsey & Wenli Li & Fang Yang, 2019. "Demographic Aging, Industrial Policy, and Chinese Economic Growth," Working Papers 2019-030, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2019-030
    Note: M
    as

    Download full text from publisher

    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Dotsey_Li_Yang_2019_demo-aging-industrial-policy-chinese-growth.pdf
    File Function: First version, March 28, 2019
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kaiji Chen & Alfonso Irarrazabal, 2015. "The Role of Allocative Efficiency in a Decade of Recovery," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 523-550, July.
    2. Banerjee, Abhijit & Qian, Nancy & Meng, Xin & Porzio, Tommaso, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," CEPR Discussion Papers 9935, C.E.P.R. Discussion Papers.
    3. Wang, Xin & Wen, Yi, 2012. "Housing prices and the high Chinese saving rate puzzle," China Economic Review, Elsevier, vol. 23(2), pages 265-283.
    4. Chadwick C. Curtis & Steven Lugauer & Nelson C. Mark, 2015. "Demographic Patterns and Household Saving in China," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 58-94, April.
    5. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    6. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    7. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    8. Chamon, Marcos & Liu, Kai & Prasad, Eswar, 2013. "Income uncertainty and household savings in China," Journal of Development Economics, Elsevier, vol. 105(C), pages 164-177.
    9. He, Hui & Huang, Feng & Liu, Zheng & Zhu, Dongming, 2018. "Breaking the “iron rice bowl:” Evidence of precautionary savings from the chinese state-owned enterprises reform," Journal of Monetary Economics, Elsevier, vol. 94(C), pages 94-113.
    10. Ge, Suqin & Yang, Dennis Tao & Zhang, Junsen, 2018. "Population policies, demographic structural changes, and the Chinese household saving puzzle," European Economic Review, Elsevier, vol. 101(C), pages 181-209.
    11. Haizheng Li & Yunling Liang & Barbara M. Fraumeni & Zhiqiang Liu & Xiaojun Wang, 2013. "Human Capital In China, 1985–2008," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(2), pages 212-234, June.
    12. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    13. Chun Chang & Kaiji Chen & Daniel F. Waggoner & Tao Zha, 2016. "Trends and Cycles in China's Macroeconomy," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 1-84.
    14. Ayşe İmrohoroğlu & Kai Zhao, 2020. "Household Saving, Financial Constraints, And The Current Account In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 71-103, February.
    15. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    16. Junmin Wan, 2015. "Household Savings and Housing Prices in China," The World Economy, Wiley Blackwell, vol. 38(1), pages 172-192, January.
    17. Liu, Zheng & Spiegel, Mark M. & Zhang, Jingyi, 2021. "Optimal capital account liberalization in China," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 1041-1061.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Dan, 2023. "Income growth, income uncertainty, and urban–rural household savings rate in China," Regional Science and Urban Economics, Elsevier, vol. 99(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Dotsey, 2019. "Demographic Aging, Industrial Policy, and Chinese Economic Growth," 2019 Meeting Papers 640, Society for Economic Dynamics.
    2. Michael Dotsey & Wenli Li & Fang Yang, 2022. "Demographic Transition, Industrial Policies, and Chinese Economic Growth," Working Papers 22-17, Federal Reserve Bank of Philadelphia.
    3. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    4. Bollinger, Christopher & Ding, Xiaozhou & Lugauer, Steven, 2022. "The expansion of higher education and household saving in China," China Economic Review, Elsevier, vol. 71(C).
    5. Steven Lugauer & Jinlan Ni & Zhichao Yin, 2014. "Micro-Data Evidence on Family Size and Chinese Saving Rates," Working Papers 023, University of Notre Dame, Department of Economics, revised Jun 2014.
    6. Horag Choi & Steven Lugauer & Nelson C. Mark, 2017. "Precautionary Saving of Chinese and U.S. Households," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(4), pages 635-661, June.
    7. Chadwick C. Curtis & Steven Lugauer & Nelson C. Mark, 2015. "Demographic Patterns and Household Saving in China," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 58-94, April.
    8. Bairoliya, Neha & Miller, Ray, 2021. "Demographic transition, human capital and economic growth in China," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    9. Song, Zhongchen & Coupé, Tom & Reed, W. Robert, 2021. "Estimating the effect of the one-child policy on Chinese household savings - Evidence from an Oaxaca decomposition," China Economic Review, Elsevier, vol. 66(C).
    10. Zhongchen Song & Tom Coupe & W. Robert Reed, 2019. "The One-Child Policy and Chinese Saving Behavior," Working Papers in Economics 19/10, University of Canterbury, Department of Economics and Finance.
    11. Manger, Mark S. & Matthews, J. Scott, 2021. "Knowing when to splurge: Precautionary saving and Chinese-Canadians," Journal of Asian Economics, Elsevier, vol. 76(C).
    12. Jianmei Zhao & Lele Zhao, 2022. "Mobile payment adoption and the decline in China’s household savings rate," Empirical Economics, Springer, vol. 63(5), pages 2513-2537, November.
    13. Rajnish Mehra & John Donaldson & Christos Koulovatianos & Jian Li, 2018. "Demographics and FDI: Lessons from China’s One-Child Policy," NCAER Working Papers 112, National Council of Applied Economic Research.
    14. Nicolas Coeurdacier & Stéphane Guibaud & Keyu Jin, 2015. "Credit Constraints and Growth in a Global Economy," American Economic Review, American Economic Association, vol. 105(9), pages 2838-2881, September.
    15. Li, Logan, 2021. "Political violence and household savings: Evidence from the long-term effects of the Cultural Revolution," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).
    16. Curtis, Chadwick C. & Lugauer, Steven & Mark, Nelson C., 2017. "Demographics and aggregate household saving in Japan, China, and India," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 175-191.
    17. Yi Chen & Yingfei Huang, 2020. "The power of the government: China's Family Planning Leading Group and the fertility decline of the 1970s," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 42(35), pages 985-1038.
    18. Liu, Hong & Ma, Jinqiu & Zhao, Liqiu, 2023. "Public long-term care insurance and consumption of elderly households: Evidence from China," Journal of Health Economics, Elsevier, vol. 90(C).
    19. Yating Dai & Jian Cheng & Daolin Zhu, 2022. "Understanding the Impact of Land Supply Structure on Low Consumption: Empirical Evidence from China," Land, MDPI, vol. 11(4), pages 1-18, April.
    20. Raül Santaeulàlia-Llopis & Yu Zheng, 2018. "The Price of Growth: Consumption Insurance in China 1989–2009," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(4), pages 1-35, October.

    More about this item

    Keywords

    aging; credit policy; household saving; output growth; China;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hka:wpaper:2019-030. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jennifer Pachon (email available below). General contact details of provider: https://edirc.repec.org/data/mfichus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.