Population Aging and Economic Growth: The Chinese Experience of Solow Model

Abstract

The tradintional and mainstream viewpoint believe that aging is a disadvantage to growth. Mild population aging viewpoint indicates that reverse-U relationship may exist between aging and growth. This paper introduces old-age dependency ratio in a standard neoclassical Solow model and obtains a steady-state relation among old-age dependency ratio, savings rate and income per-capita. The model shows that population aging possibly has both positive and negative effects on economic growth. Through co-integration test of GDP per-capita, national savings ratio and old-age dependency ratio in China (1978-2012), it is found that, in the long-run, national savings rate and population aging have positive effects on the increase of per-capita income, and the influence of aging on economic growth exceeds that of national savings rate.