ECONOMIC IMPACTS OF POLICY ADOPTED BY CHINA FOR ITS AGING POPULATION

Abstract

With China’s rapidly aging population, this paper constructs a policy model using overlapping generation (OLG) model and the computable general equilibrium (CGE) modeling to analyze the second-child policy and delaying retirement policy. Our research findings suggest that considering the short-term effects, delaying the retirement age imposes a greater impact on the economy than the second-child policy. Its economic impact increases initially, but then decreases to a stable level showing a diminishing influence. In the long term, the second-child policy has greater ability to boost the economy than the delaying retirement age policy and its economic impact gets stronger. From an industrial output perspective, the two policies exert greater influence on agriculture, light industry, finance and service sector than on construction and heavy industries. From an industrial import and export perspective, the two policies have great influence on finance, electric power, and fossil energy more than they do on the agricultural sector. From a monetary perspective, the impacts are greater on household income followed by the government income and corporate income, respectively. The policies also make a bigger difference to fixed capital than to changes in deposits and loans.