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Projected Economic Growth in China and India: The Role of Demographic Change

Rodney Tyers, Jane Golley () and Iain Bain ()

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: Within the next decade, China’s labour force will begin to contract, while that of India will expand faster than its population. Relative labour abundance will bring higher capital returns and an increasing share of global FDI to India. Yet China may relax its One Child Policy further and India’s fertility could follow the pattern elsewhere in Asia and decline faster than expected. These linkages are explored using a global demographic sub-model that is integrated with an adaptation of the GTAP-Dynamic global economic model in which regional households are disaggregated by age and gender. Even with a two-child-policy, China’s growth is projected to slow in future with India becoming the fastest growing economy in the world on the strength of its continued population expansion. While GDP depends positively on fertility and per capita income negatively in both countries, the price of more GDP growth in terms of lost per capita income is lower in China than in India, a result that depends critically on India’s initially higher fertility, its higher youth dependency and the age-gender pattern of its participation rates. India therefore has considerably more to gain, at least in per capita terms, from further reducing its fertility

JEL-codes: C68 E27 F43 J11 O53 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-11
New Economics Papers: this item is included in nep-cna, nep-cwa, nep-dev, nep-mac and nep-sea
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