Demographics and FDI: lessons from China’s one-child policy

John B. Donaldson, Christos Koulovatianos, Jian Li and Rajnish Mehra

Macroeconomic Dynamics, 2025, vol. 29, -

Abstract: Following the introduction of the one-child policy in China, the capital-labor ratio of China increased relative to that of India, while FDI/GDP inflows to China versus India simultaneously declined. These observations are explained in the context of a simple neoclassical overlapping generations paradigm. The adjustment mechanism works as follows: the reduction in the growth rate of the (urban) labor force due to the one-child policy increases the capital per worker inherited from the previous generation. The resulting increase in China’s domestic capital-labor ratio thus "crowds out" the need for foreign direct investment (FDI) in China relative to India. Our paper is a contribution to the nascent literature exploring demographic transitions and their effects on FDI flows.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: Demographics and FDI: Lessons from China's One-Child Policy (2018)
Working Paper: Demographics and FDI: Lessons from China’s One-Child Policy (2018)
Working Paper: Demographics and FDI: Lessons from China's one-child policy (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:29:y:2025:i::p:-_15

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().