Assessment of China’s Qualitative Demographic Dividend for Economic Growth during 2016-2020

Li Gang, Liang Yongmei and Shen Keting

Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing, China

Abstract:  Given the great strides that China’s education sector has made in recent decades, it can be expected that the overall workforce quality of exiting China’s labor market in coming one or two decades will be relatively low, while the overall quality
of workforce newly entering into China’s labor market will be high. As the new, better-educated generation takes over, China’s workforce quality will be vastly improved. This in turn will promote economic growth. We refer to economic growth arising from improved workforce quality as qualitative demographic dividend. Using the computable general equilibrium (CGE) model, this paper investigates the relationship between workforce quality improvements and economic growth. According to the model’s results, an improvement in workforce quality will raise the economic growth rate by about two percentage points
per annum between 2016 and 2020 and by 10 percentage points cumulatively by 2020. In other words, GDP will be 1.1 times the level of baseline GDP by 2020 due to the improved education levels. Given different production functions across sectors, the improvement of workforce quality will affect different sectors in different ways. On the whole, the improvement of workforce quality is more favorable to the development of capital-intensive sectors and sectors with rapid technology progress. According to this paper, considering the improvement of workforce quality, we cannot conclude that China’s potential economic growth rate has already begun to decline. Despite diminishing conventional quantitative demographic dividends, China’s qualitative demographic dividends will keep rising. Qualitative demographic dividends will further push forward China’s industrial
restructuring and the strategic transition of industrial competitiveness from quantitative to qualitative and from an extensive to an intensive pattern of development.
Keywords: qualitative demographic dividends, economic growth

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