Demographic dividends and China’s post-reform economy

Andrew Mason, University of Hawaii at Manoa
Feng Wang, University of California, Irvine

The divergence between production and consumption interacts with changes in population age structure to generate two demographic dividends. The first dividend arises because the share of the population concentrated at the productive ages rises. The second dividend arises as individual behaviour and public policy with respect to the accumulation of wealth adjust to anticipated increases in the importance of retirement. China presents an important case to examine these dividends: for the size of its population, the pace of its fertility decline and aging process, and for its recent spectacular economic growth. China’s dividends are quantified using the 2000 Urban Income and Expenditure Survey to estimate model parameters. The first dividend is substantial between 1982 and 2000, but gains are minimal after 2000 and turn negative in 2013. The second dividend, however, could produce a permanent doubling of output per worker given appropriate policy.