Demographic Transition, Industrial Policies and Chinese Economic Growth

Michael Dotsey, Wenli Li and Fang Yang

No 2210, Working Papers from Federal Reserve Bank of Dallas

Abstract: We build a unified framework to quantitatively examine how demographic transition and industrial policies have contributed to China’s economic growth in the past five decades. On the demographic side, we consider evolutions in government population-control policies, life expectancy and pension income replacement. Industrial policies include changes in the speed of the growth of entrepreneurship, industry-specific interest subsidies and financial intermediation costs. Our analyses suggest that the demographic transition alone barely affects the aggregate savings rate, mainly due to general equilibrium feedback effects from prices. However, demographics account for a considerable fraction of the increase in per capita output growth since 1970. By comparison, industrial policy changes contribute significantly to the rise in both the aggregate savings rate and per capita output growth during the period. Notably, the interactions between the demographic transition and industrial policy changes cause aggregate savings to rise, but have little effect on per capita output growth. A novel factor of the model is endogenous human capital accumulation, a driver of per capita output growth. Our results are robust to the endogenization of fertility decisions.

Keywords: Aging; Credit policy; Household saving; Output growth; China (search for similar items in EconPapers)
JEL-codes: E21 J11 J13 L52 (search for similar items in EconPapers)
Pages: 57
Date: 2022-07-15, Revised 2024-02-08
New Economics Papers: this item is included in nep-cna, nep-dem, nep-dge, nep-fdg, nep-gro, nep-his and nep-lab
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Working Paper: Demographic Transition, Industrial Policies, and Chinese Economic Growth (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:94497

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DOI: 10.24149/wp2210r1

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