One Child Policy: Implications on China's Future

Open Access
Author:
Zhang, Daodao Vicky
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Alexander Monge Naranjo, Thesis Supervisor
  • Bee Yan Roberts, Honors Advisor
Keywords:
  • One Child Policy
  • China
  • Dependency Ratios
  • Savings Rate
  • Pension Reform
Abstract:
This thesis analyzes China’s one child policy and how it has caused an aging problem that can be seen through an increasing aged dependency ratio. The paper starts with an overview of the policy and some of the reasons the government implemented it. It then examines how the policy changed the age structure of the population and how this shift will affect the savings rate and the pension system. The analysis of the savings rate will be based on Nathaniel Leff’s regressions from his 1969 paper. The regression results show that there is a negative relationship between dependency ratios and savings rates and support my argument that China’s rising aged dependency ratio will cause their savings rate to go down. Finally, there is a discussion of China’s pension system and how the current pay-as-you-go system is not sustainable; the one child policy created an aging problem and will force China to rethink its current system in order to accommodate the elderly