Functionary Mechanism between Demographic Structure and Economic Growth in China Based on Cointegrating Methods

Feixue Huang and Jingqin Su

Research in World Economy, 2010, vol. 1, issue 1, 10-27

Abstract: This study¡¯s objective was to solve the problem of functionary mechanism between demographic structure transition and economic growth in China using cointegration and vector error correction model. The results are: (1) A long-term co-integration relationship exists among birth rate, infant mortality, real GDP per capita and average wage of workers; (2) According to VECM, the adjustment of the economic system is 0.024 when the fluctuation of birth rate deviates from the equilibrium state; (3) Demographic variables are endogenous in the economic system. The conclusions are: (1) In China high-speed economic growth as well as low stable birth rate should be kept and domestic wealth should be accumulated via escalating the average wage; (2) To reduce the impact of the aging population on economic growth in China, high-qualified people¡¯s demand for birth should be stimulated to accelerate the transition of industrial structure from labor-intensive to knowledge-intensive.

Keywords: Vector Error Correction Model; Generalized Impulse Response Function; Variance Decomposition; Demographic window of opportunity; Aging population (search for similar items in EconPapers)
Date: 2010
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