Quantity or quality: who makes manufacturing stronger?

Zheng Li, Yan Miao and Ying Liu

Journal of the Asia Pacific Economy, 2024, vol. 29, issue 3, 1418-1436

Abstract: China’s rate of aging population and declining fertility are very rapid. The role of demographic transition in the development of the manufacturing industry remains controversial. We construct a heterogeneous DSGE model that includes demographic dividends to simulate and analyze the impact of demographic transition on the expansion and upgrading of manufacturing industry. Besides, we conduct empirical research using China’s provincial-level panel data from 2003 to 2020. The results reveal that, first, the recession of the first demographic dividend characterized by a decrease in labor supply has suppressed the expansion of manufacturing scale, but promoted structural upgrading; second, the second demographic dividend can promote the growth of output in various manufacturing industries, especially advanced manufacturing; third, receiving the second demographic dividend can offset the negative effect from recession of the first demographic dividend on manufacturing industry. However, the negative impact currently suffered by China’s manufacturing industry cannot be fully compensated for.

Date: 2024
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DOI: 10.1080/13547860.2024.2305319

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