Abstract:
The falling projections of working-age population in China has led to predictions of much slower economic growth. We consider three mechanisms that could contribute to higher effective labor supply growth – further improvement in educational attainment due to cohort replacement and rising college enrollment, improvement in aggregate labor quality due to urbanization, and higher labor force participation due to later retirement. We find that these factors result in a projected growth rate of effective labor input of 0.40% for 2015-2030 compared to -0.60% for working age population. As a result, the projected growth rate of GDP will be 5.80% for 2015-2030 compared to 5.23% if these factors are ignored.
