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Original Articles

Demographic transition, demographic dividend, and Lewis turning point in China

Pages 107-119
Accepted 15 Jun 2010
Published online: 28 Sep 2010
 

The disagreements on changed stages of demographic transition and the role of a demographic dividend in a dual economy development process often lead to wide debates among scholars about China's development stages. This paper tries to reveal the nexus between demographic transition and dual economy development: the common starting point, close-related processes, and identical characteristics of stages. Based on the empirical evidence of population dynamics, the paper supports the judgment of diminishing demographic dividends and an imminent Lewis turning point in China. The paper also argues that keeping a sustainable and steady economic growth, and becoming a high-income country as early as possible is the key and only way to close the ‘aging before affluence’ gap. Accordingly, the paper concludes by proposing measures to exploit the potential of the first demographic dividend, creating conditions for a second demographic dividend, and tapping new sources of economic growth.

Notes

1. This existing paper does not intend to discuss the various views caused by different definitions of Lewis turning point. According to Lewis (1972 Lewis, Arthur. 1972. “Reflections on unlimited labour”. In International economics and development, Edited by: Di Marco, L. 7596. New York: Academic Press. [Crossref] [Google Scholar]) and Ranis and Fei (1961 Ranis, Gustav and John, C.H. Fei. 1961. A theory of economic development. The American Economic Review, 51(4): 533565. [Web of Science ®] [Google Scholar]), Lewis turning point can be referred to as the period of time at which expansion of labor demand exceeds that of labor supply and, as a result, wage rate of ordinary workers starts to rise, while wage of agricultural sector is not yet determined by its marginal productivity of labor and the difference of marginal productivity of labor between agricultural and non-agricultural sectors remains. And the time when the wage rates in agricultural and non-agricultural sectors are both determined by their marginal productivity of labor and the gap in productivities disappears can be called the commercial point. Only at this time, dual economy ends.

2. The 5th National Population Census conducted in 2000 shows that China's TFR was 1.32, which is even lower than policy allowable level of 1.51. Many doubt such a result (e.g. Yu 2002 Yu, Xuejun. 2002. Estimation on magnitude and structure of 5th National Population Census. Population Research, 26(3): 914.  [Google Scholar]). Since then the debates on what is the actual TFR of China have existed among scholars and policy researchers. Generally speaking, the government departments responsible for implementing the population control policy tend to believe in a higher TFR, whereas scholars believe in a lower TFR. In spite of the disagreement, the estimates mostly fall in the range of 1.6 to 1.8, which are all significantly lower than the replacement level of 2.1.

3. Whereas Thompson (1929 Thompson, Warren S. 1929. Population. American Journal of Sociology, 34(6): 959975. [Crossref] [Google Scholar]) first identified the three stages of demographic transition and another scholar added two more later stages, they were both not considered as the father of the theory of demographic transition, because they did not provide standard theoretical explanation on the decline of fertility. The honor was later awarded to Notestein (1945 Notestein, Frank W. 1945. “Population – the long view”. In Food for the world, Edited by: Schultz, Theodore W. Chicago: University of Chicago Press.  [Google Scholar]). Please see Caldwell (1976 Caldwell, John C. 1976. Toward a restatement of demographic transition theory. Population and Development Review, 2: 321366. [Crossref], [Web of Science ®] [Google Scholar]) for a brief history of this field.

4. In an econometric study, Du (2004) Du, Yang. 2005. The formation of low fertility and its impacts on long term economic growth in China. The World Economy, 12: 1423.  [Google Scholar] found that population policy, per capita GDP and level of human capital are decisive factors driving down China's fertility and empirically identified the different effects of the three factors.

5. It is commonly believed that the Japanese economy in 1960 and Korean and Taiwan economies reached their Lewis turning point, respectively (for example, Minami 1968 Minami, Ryoshin. 1968. The turning point in the Japanese economy. The Quarterly Journal of Economics, 82(3): 380402. [Crossref], [Web of Science ®] [Google Scholar]; Bai 1982 Bai, Moo-ki. 1982. The turning point in the Korean economy. Developing Economies, 20(2): 117140. [Web of Science ®] [Google Scholar]).

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