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The labor force age structure and employment structure of the modern sector

Rui Mao, Jianwei Xu and Jingxian Zou

China Economic Review, 2018, vol. 52, issue C, 1-15

Abstract: This paper studies the relationship between population aging and structural change in terms of employment distribution in the non-agricultural sector. Based on cross-country panel data, it is revealed that a greater share of elderly workers in the labor force is associated with more service employment relative to that in the industrial sector. To rationalize this finding, a two-sector overlapping generations model is constructed. The model highlights two forces, namely the “scale effect (SE)” and the “composition effect (CE)”, that drive the correlation between the labor force age structure and the service-industry employment ratio. Calibrating main model parameters with China's micro level data, simulation results well fit the country's historical trajectory of structural change. According to population forecast data, the model predicts a substantial growth of services relative to the industrial sector in China up to 2050.

Keywords: Labor force age structure; Population aging; Structural change; Employment ratio (search for similar items in EconPapers)
JEL-codes: E2 J1 L6 L8 O1 O4 (search for similar items in EconPapers)
Date: 2018
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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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