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Demographic Change and the Labour Supply Constraint

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  • Jane Golley

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  • Rod Tyers

    ()

Abstract

China’s economic growth has, hitherto, depended on its relative abundance of production labour and its increasingly secure investment environment. Within the next decade, however, China's labour force will begin to contract. This will set its economy apart from other developing Asian countries where relative labour abundance will increase, as will relative capital returns. Unless there is a substantial change in population policy, the retention of China’s large share of global FDI will require further improvements in its investment environment, in its factor productivity and/or in its labour force participation rates. The links between demographic change, labour participation rates and growth performance are explored here using a new global demographic model that is integrated with an adaptation of the GTAP-Dynamic global economic model in which regional households are disaggregated by age and gender. China’s share of global investment, and hence its growth rate in per capita terms, is found to depend sensitively on its labour force growth and this, in turn, depends on both fertility and labour force participation. Rates of aged participation are low in China but likely to increase and this could offset the growth-retarding effects of fertility decline and ageing.

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Bibliographic Info

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2006-467.

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Length: 26 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:acb:cbeeco:2006-467

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  1. Robert D. Retherford & Minja Kim Choe & Jiajian Chen & Li Xiru & Cui Hongyan, 2005. "How Far Has Fertility in China Really Declined?," Population and Development Review, The Population Council, Inc., vol. 31(1), pages 57-84.
  2. Rod Tyers & Iain Bain & Jahnvi Vedi, 2006. "The global implications of freer skilled migration," PGDA Working Papers 1006, Program on the Global Demography of Aging.
  3. John Giles & Albert Park & Fang Cai, 2003. "How has Economic Restructuring Affected China’s Urban Workers?," William Davidson Institute Working Papers Series 2003-628, William Davidson Institute at the University of Michigan.
  4. Guangyu Zhang & Zhongwei Zhao, 2006. "Reexamining China's Fertility Puzzle: Data Collection and Quality over the Last Two Decades," Population and Development Review, The Population Council, Inc., vol. 32(2), pages 293-321.
  5. Cai Fang & Wang Dewen, 2005. "Demographic transition: implications for growth," Labor and Demography 0512001, EconWPA.
  6. Liu, Jing & Nico van Leeuwen & Tri Thanh Vo & Rod Tyers & Thomas W. Hertel, 1998. "Disaggregating Labor Payments by Skill Level in GTAP," GTAP Technical Papers 314, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Jörg Mayer, 2003. "The Fallacy Of Composition: A Review Of The Literature," UNCTAD Discussion Papers 166, United Nations Conference on Trade and Development.
  8. Fleischer, Belton M. & Yang, Dennis T., 2003. "Labor laws and regulations in China," China Economic Review, Elsevier, vol. 14(4), pages 426-433.
  9. Rod Tyers & Qun Shi, 2006. "Global Demographic Change, Labour Force Growth and Economic Performance," ANU Working Papers in Economics and Econometrics 2006-462, Australian National University, College of Business and Economics, School of Economics.
  10. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, World Bank Group, vol. 2(1), pages 1-47, January.
  11. Chu Junhong, 2001. "Prenatal Sex Determination and Sex-Selective Abortion in Rural Central China," Population and Development Review, The Population Council, Inc., vol. 27(2), pages 259-281.
  12. Hussain, Athar, 2002. "Demographic Transition in China and its Implications," World Development, Elsevier, vol. 30(10), pages 1823-1834, October.
  13. Steven A. Symansky & Peter S. Heller, 1997. "Implications for Savings of Aging in the Asian "Tigers"," IMF Working Papers 97/136, International Monetary Fund.
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Cited by:
  1. Huw McKay, 2008. "Metal Intensity in Comparative Historical Perspective: China, North Asia, the United States & the Kuznets Curve," GDSC Working Papers 006, Institute of Global Dynamic Systems.

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