Demographic Change, Savings, Investment, and Economic Growth

Abstract

Few would doubt that China's demographic changes have had a significant impact on its economic growth, but little attention has been given to distinguishing specific structural indicators of this trend. This article investigates the growth effects of China's demographic changes in the realms of labor supply and human capital improvement on savings and investment. Using provincial panel data, the results show that China's demographic structure is in a transitional phase in which economic growth is fostered by the increasing savings and investment rates of its aging population. The issue of how to take advantage of this growing population sector for savings, investment, and economic growth has important policy implications.