Impacts of Population Aging on Economic Growth and Structure Change in China

The feature of Chinese demographic structure is changing from a high fertility rate, high death rate and low life expectancy to low fertility rate, low death rate and high life expectancy, and the phenomena of ageing population in coming future will become more serious. The data of Sixth National Population Census show that the ageing rate of the population is higher than expectations, the share of population with age 60 years and above is 13.26%, the share of population with age 65 years and above is 8.87%; average number of members of each household is 3.10 persons, this figure is 0.34 person less than 3.44 persons of Fifth National Population census in 2000. This demographic change has not only increased the burden of social security pension and reduced the active labor force; it will also influence the saving rate and consumption structure and further affect the economic structure and sustainability of China’s economic development. CGE has been applied to many research areas, but the papers considering the population age structure factors in the CGE model are not a lot. With the aging of the population received extensive attention, some foreign scholars began to use the CGE model studying the aging of the population, such as Sang Gyoo's Yoon, Geoffrey J.D.Hewings (2006), Euijune Kim, Geoffrey J.D. HewingsHeedeok Cho (2011), Seryoung Park, Geoffrey J.D. Hewings (2010). But CGE model study considers more about the size of the labor supply, the homogeneity of the representative consumer assumption, but does not take into considering that the aging will affect the economy from consumption aspect. In fact, with the economic development, the growth of life, and the higher levels of education, it results in the extension of the retirement age, which may make the labor force did not declined as imagined, especially as a country with a large population. At the same time, changes in consumer behavior of people of different ages may be larger and more important, Hewing (1982, 1989) pointed out that the household sector and consumer behavior in the CGE model is very important, the family of different age structure generally have different consumption patterns. Therefore, by improving the DRC-CGE model and introducing variables to characterize the structure of household consumption patterns in the demand side, the paper study different population policy and the family demographic changes on economic growth and industrial structure, to provide policy recommendations on population policy orientation. This paper starts the study to analyze change of consumption structure of household of various age structure based upon survey data (2003-2007) of CHIPS (Chinese Household Income Project) to explore the changing relationship between China’s demographic structure and consumption structure. Then according to the head of household age and family size of the household, we divided the households in the CGE model into 12 groups (six groups in rural and urban areas respectively) to capture the relation between consumer behavior and demographic structure, and analyze the impact of demographic change under three different population policies scenarios on the China’s economic growth and structure change using DRC dynamic recursive CGE model.