Zhang, Yimeng Oliver; (2025) Population Aging, Structural Change, and Economic Growth: The Case of China. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

Population aging is a worldwide phenomenon. However, there is limited consensus regarding the effects of aging. China is an interesting case because of its enormous size, impressive economic development, and rapid population aging. In this thesis, we present five studies on population aging, structural change, and economic growth in China. In the first two studies, we approach the topic from the supply side. We compile data for China’s sectoral factor inputs, including sectoral capital services and age-specific sectoral effective labour. Using said data, we conduct sectoral growth accounting for China. Our results show that factor accumulation and productivity growth are both important drivers of China’s aggregate economic growth. While growth in services was overwhelmingly due to factor accumulation, growth in agriculture was due to productivity growth. Compared to young workers, older workers had lower employment per capita, falling labour productivities, and greater tendencies to work in agriculture. Resultantly, aging may have impeded structural change and economic growth in China. In the third and fourth studies, we focus on the demand side. We estimate time series of China’s age-consumption profiles by type. We then estimate aggregate and age-specific sectoral demand functions. We find that compared to youth, elderlies prefer agricultural consumption and disprefer service consumption. Through counterfactual analyses, we find that relative price effect and income effect played important roles in driving China’s structural change. The effects on elderlies’ consumption were stronger than others due to elderlies’ relatively low elasticities of demand. Building on the previous studies, the fifth study calibrates and simulates a three-sectors and six-generations overlapping-generations model of China. Through counterfactual analyses, we find that aging impedes China’s structural change towards services through preferences, capital deepening, and government spending. Although aging boosts per capita output by raising per capita savings, aging lowers aggregate output by diminishing effective labour input.

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