The one child policy and old age dependency effect on the Chinese provincial economic growth -

Abstract

This thesis discusses the One Child Policy (OCP) that has been put in effect since 1979 in China. It concentrates on understanding its effect on the provincial economic growth by adopting the Classical Solow model since 1954 till 2004. Then, it focuses on the relaxation of this policy since the end of 2013, and one of the reason of this loosening: the increasing in the old age dependency ratio that plays a role in affecting the household per-capita saving rate on the regional level. This thesis is divided into five chapters: Chapter 1 is an introduction that gives a brief history of the OCP and mentions its relaxation. Chapter 2 is a literature review that includes what previous researchers conclude about the impact of OCP on growth in China, the importance of Solow model as a population model, in addition to the impact of old ageing on the channels that affect the economic growth. Chapter 3 is about theoretical frameworks. In this section, Solow model is theorized .Chapter 4 is the empirical part of the thesis where two regressions based on the panel data approach are adopted. The first regression treats the regional GDP growth as the dependent variable while the population growth and capital stock (including varying depreciation rates across the provinces) growth rates are considered as independent variables. The OCP is treated as a dummy variable and is found to affect positively and significantly the dependent variable. The second regression considers the household per-capita saving rate as the dependent variable, and it is- according to the literature- one of the channels that affects the economic growth while the old age and young dependency ratio, real interest rates, life expectancy and regional GDP per capita are the explanatory variables. The conclusion derived is that the old age dependency ratio affects negatively the saving rate, but it is insignificant. Chapter 5 concludes and summarizes what has been mentioned before. It includes recommendations