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Population Ageing, Labour Market Reform and Economic Growth in China - A Dynamic General Equilibrium Analysis

Author

Listed:
  • Xiujian Peng
  • Yinhua Mai

Abstract

The dramatic fertility decline since the beginning of 1970s has decelerated the growth of China's working age population. From 2015, this growth will turn sharply negative, resulting declining labour force in China. This has caused concerns about the sustainability of China's economic growth. This paper sheds lights on the view that a more efficient allocation of labour between sectors is likely counter balance the negative effect of populating ageing. Using a dynamic CGE model of China, we analyse the effects of removing labour market distortions that hinder the movement of labour from agricultural to manufacturing and services sectors over the period 2008 to 2020 in the context of declining growth of labour supply in China. Simulation results shows that removing the discriminations against rural workers in urban area will increase the labour shift from agricultural to non-agricultural sectors. The resulting increase in the movement of rural labour will mitigate the adverse effects of population ageing by raising not only the growth rate of total output but also household living standard. China can enjoy continued growth in its manufactured exports even with a slower growth in its labour force.

Suggested Citation

  • Xiujian Peng & Yinhua Mai, 2008. "Population Ageing, Labour Market Reform and Economic Growth in China - A Dynamic General Equilibrium Analysis," Centre of Policy Studies/IMPACT Centre Working Papers g-174, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:g-174
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    Citations

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    Cited by:

    1. Wang, Xinxin & Chen, Kevin Z. & Robinson, Sherman & Huang, Zuhui, 2016. "Will China’s demographic transition exacerbate its income inequality? A CGE modeling with top-down microsimulation:," IFPRI discussion papers 1560, International Food Policy Research Institute (IFPRI).
    2. Xinxin Wang & Kevin Z Chen, 2016. "Will China’s Demographic Transition Exacerbate Its Income Inequality? A CGE Modeling with Top-down Microsimulation," Working Papers id:11406, eSocialSciences.
    3. Anping Chen & Nicolaas Groenewold, 2011. "Regional Equality and National Development in China: Is There a Trade‐Off?," Growth and Change, Wiley Blackwell, vol. 42(4), pages 628-669, December.

    More about this item

    Keywords

    population ageing; labour market reform; rural migration; CGE model; China;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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