HARVESTING THE DEMOGRAPHIC BONUS

Abstract

This paper summarizes and analyses the preconditions for harvesting the demographic bonus as well as the corresponding situations in urban and rural China. This paper introduces an overlapping generation model to illustrate the effects of decline in fertility rate and immigration on the demographic window. Based on the case of Shanghai, it is argued that internal migration is the bridge to match the conditions of harvesting demographic bonus in both sending and receiving areas. It could prolong the time span for harvesting the demographic bonus in the urban areas while providing opportunities for the poor rural areas to be able to harvest the demographic bonus, thus resulting in a win–win situation.

Keywords:

• demographic bonus
• migration

This is a revised version of a paper prepared at the International Conference on the Demographic Window and Healthy Ageing: Socioeconomic Challenges and Opportunities, Beijing, 10–11 May, 2004. The authors are grateful to three anonymous referees for their constructive criticism and helpful suggestions. Finally, the authors also have benefited from comments by Xuehui Han of the Fudan University, and participants in seminars at the Peking University (CCER).

Notes

1. The real wage is W(t) = A(t)[f(k(t)) − k(t)f’(k(t))].

2. The detailed derivation is in the Appendix.

3. The Cobb-Douglas production function takes the form of F(K,AL) = K ^α (AL)^1 − α , 0 < α<1, then, f(k) = k ^α ,f’(k) = αk ^α−1. Under the conditions, θ=1, .

4. This is a published figure from Shanghai's Fifth Population Census, refers to those who stay in Shanghai for more than half a year at the time of the census, 1 November 2000.

5. Only those who hold Shanghai's permanent registration status are counted in this calculation. In China's statistics, at least two terms are commonly used regarding population. One is the population of registered permanent residents (Hukou); the other is current residents including all population living in the place for more than half a year regardless of their registration status. Caution should be exercised in interpreting those population figures.

6. These figures refer to native population (local people with Shanghai's household registration status) only.

7. That is, AL/N.

8. ‘Proj-s4’ represents the projection of the dependence ratio under the consumption that there was no migration from the fourth national census which was in 1990; ‘Proj-s5’ represents the projection of the dependence ratio under the consumption that there was no migration from the fifth national census which was in 2000; ‘Including migration’ represents the projection of the dependence ratio under the consumption that the future immigration pattern in Shanghai always keep constant.

9. We do not present the details of all procedures and variables of those projections. Interested readers could find the materials in our original paper presented at the International Conference on the Dermographic Window and Healthy Ageing: Socioeconomic Challenges and Opportunities, Beijing, 10–11 May 2004.

10. At present, China's pension system is urban focused and usually only covers the urban local residents. Migrant workers are in general not participating to the urban system.