Dealing with an aging China—Delaying retirement or the second-child policy?

Abstract

To tackle China’s rapidly aging population, a policy was framed by using overlapping generations (OLG) model and computable general equilibrium (CGE) model; the main objective was to successfully implement “second-child policy” and “delayed retirement age” for female or male workers. The 2012 census data was obtained from National Bureau of Statistics of China. Our research findings suggest that the economy can be improved in the short-term by delaying retirement age; however, Chinese economy would improve tremendously in the long run by implementing second-child policy. Compared to delayed retirement age, second-child policy would be more effective in improving the economy in China. In terms of industrial output, the three policies have a greater influence on labor-intensive industries, such as agriculture, light industry, finance, and service sector; the impact is less significant on construction and heavy industry. In terms of industrial import and export, these three policies have greatly influenced following industries: finance, electric power, and fossil energy. From a monetary perspective, these three policies can significantly improve household income; these three policies did not significantly impact both government and corporate incomes.