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Will China's demographic transition exacerbate its income inequality?–CGE modeling with top-down microsimulation

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  • Xinxin Wang
  • Kevin Z. Chen
  • Sherman Robinson
  • Zuhui Huang

Abstract

Demographic transition due to population aging is an emerging trend throughout the developing world, and it is especially acute in China, which has undergone demographic transition more rapidly than have most industrial economies. This paper quantifies the distributional effects in the context of demographic transition using an integrated recursive dynamic computable general equilibrium model with top-down behavioral microsimulation. The results of the poverty and inequality index indicate that population aging has a negative impact on the reduction of poverty while its impact is positive with regard to equality. In addition, elderly rural households are experiencing the most serious poverty, and their inequality problems compared with other household groups and within-group inequality worsen with demographic transition. These findings not only advance the previous literature but also deserve particular attention from Chinese policy-makers.

Suggested Citation

  • Xinxin Wang & Kevin Z. Chen & Sherman Robinson & Zuhui Huang, 2017. "Will China's demographic transition exacerbate its income inequality?–CGE modeling with top-down microsimulation," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 22(2), pages 227-252, April.
    • Handle: RePEc:taf:rjapxx:v:22:y:2017:i:2:p:227-252
    DOI: 10.1080/13547860.2016.1263043
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    References listed on IDEAS

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    4. Schultz, T.P., 1997. "Income Inequality in Taiwan 197601995: Changing Family Composition, Aging, and Female Labour Force Participation," Papers 778, Yale - Economic Growth Center.
    5. Xiujian Peng & Dietrich Fausten, 2006. "Population Ageing And Labour Supply Prospects In China From 2005 To 2050," Monash Economics Working Papers 16/06, Monash University, Department of Economics.
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