One child policy: the dynamics of China's changing population composition

Abstract

With China’s recent reversal of her One-child policy attempting to tackle problems of a rising dependency ratio associated with an ageing population, this paper aims to uncover the root cause of the replacement of the one-child policy: the increasing dependency ratio. We do so by asking the following research question: Was the One-Child policy responsible for the decline in dependency ratio in China? This paper utilises a synthetic control method, utilising data taken from the UN, World Bank, Penn World Tables and Barro-Lee to construct a model of China without the One-child policy.

Our simulation uncovered three key findings: 1) the OCP accelerated the initial decline of China’s dependency ratio; 2) the dependency ratio of China would decline regardless of the OCP and; 3) In the long run, the OCP might have resulted in an increasing dependency ratio.

The three findings, in the absence of the One-Child policy, identified that China’s declining dependency ratio trend would likely be more akin to the world’s average, as expected for a country going following a standard development trajectory. The findings also assist us with aligning the footprints of China’s economic development trajectory with her population growth history. The story pieced together might provide insights for Chinese policymakers as they attempt to curtail China’s dependency ratio reverse in trend.