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Chronicle of a Decline Foretold; Has China Reached the Lewis Turning Point?

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  • Mitali Das
  • Papa M N'Diaye

Abstract

China is on the eve of a demographic shift that will have profound consequences on its economic and social landscape. Within a few years the working age population will reach a historical peak, and then begin a precipitous decline. This fact, along with anecdotes of rapidly rising migrant wages and episodic labor shortages, has raised questions about whether China is poised to cross the Lewis Turning Point, a point at which it would move from a vast supply of low-cost workers to a labor shortage economy. Crossing this threshold will have far-reaching implications for both China and the rest of the world. This paper empirically assesses when the transition to a labor shortage economy is likely to occur. Our central result is that on current trends, the Lewis Turning Point will emerge between 2020 and 2025. Alternative scenarios—with higher fertility, greater labor participation rates, financial reform or higher productivity—may peripherally delay or accelerate the onset of the turning point, but demographics will be the dominant force driving the depletion of surplus labor.

Suggested Citation

  • Mitali Das & Papa M N'Diaye, 2013. "Chronicle of a Decline Foretold; Has China Reached the Lewis Turning Point?," IMF Working Papers 13/26, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:13/26
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    References listed on IDEAS

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    1. Zhang, Xiaobo & Yang, Jin & Wang, Shenglin, 2011. "China has reached the Lewis turning point," China Economic Review, Elsevier, vol. 22(4), pages 542-554.
    2. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: Demographic Change and the Labour Supply Constraint," PGDA Working Papers 1106, Program on the Global Demography of Aging.
    3. Knight, John & Deng, Quheng & Li, Shi, 2011. "The puzzle of migrant labour shortage and rural labour surplus in China," China Economic Review, Elsevier, vol. 22(4), pages 585-600.
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    Cited by:

    1. Rickne, Johanna, 2013. "Labor market conditions and social insurance in China," China Economic Review, Elsevier, vol. 27(C), pages 52-68.
    2. Dreger, Christian & Zhang, Yanqun, 2017. "The Hukou Impact on the Chinese Wage Structure," IZA Discussion Papers 10720, Institute for the Study of Labor (IZA).
    3. Cohen, Benjamin J., 2015. "The Demise of the Dollar?," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 18.
    4. Aktoty Aitzhanova & Shigeo Katsu & Johannes F. Linn & Vladislav Yezhov (ed.), 2014. "Kazakhstan 2050: Toward a Modern Society for All," Books, Emerging Markets Forum, edition 1, number kazakh2050, July-Dece.
    5. Felipe, Jesus & Bayudan-Dacuycuy, Connie & Lanzafame, Matteo, 2016. "The declining share of agricultural employment in China: How fast?," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 127-137.
    6. Prema-chandra Athukorala & Zheng Wei, 2015. "Economic Transition and Labour Market Dynamics in China: An Interpretative Survey of the ‘Turning Point’ Debate," Departmental Working Papers 2015-06, The Australian National University, Arndt-Corden Department of Economics.
    7. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611, April.
    8. Crafts, Nicholas & O’Rourke, Kevin Hjortshøj, 2014. "Twentieth Century Growth*This research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546.," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 263-346 Elsevier.
    9. Marie Luise Funke & Helena Xiang Li & Horst Löchel, 2016. "The High Profitability of Big Chinese State-Owned Banks and China’s Growth Model," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 33(1), pages 121-134, August.

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