Tài liệu Impact of changing population structure on economic growth of vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY TRAN NGOC HAI LINH IMPACT OF CHANGING POPULATION STRUCTURES ON ECONOMIC GROWTH OF VIETNAM MASTER'S THESIS PUBLIC POLICY VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY TRAN NGOC HAI LINH IMPACT OF CHANGING POPULATION STRUCTURES ON ECONOMIC GROWTH OF VIETNAM MAJOR: PUBLIC POLICY CODE: 8340402.01 RESEARCH SUPERVISOR: Dr. VU HOANG LINH Associate Prof. MOGES ABU GIRMA Hanoi, 2020 TABLE OF CONTENT LIST OF FIGURES .................................................................................................. i LIST OF TABLES ................................................................................................... ii LIST OF ABBREVIATIONS................................................................................. iii ACKNOWLEDGEMENTS .................................................................................... iv CHAPTER 1: INTRODUCTION ............................................................................1 1.1. Research background ...........................................................................1 1.2. Problem statement ................................................................................6 1.3. Purpose of the study ..............................................................................6 1.4. Research questions ................................................................................6 1.5. Research method ...................................................................................7 1.6. Significance of the study .......................................................................7 1.7. Thesis’ structure: ..................................................................................7 CHAPTER 2: LITERATURE REVIEW ................................................................9 2.1. International literature on the impacts of changing population structures on economic growth:...........................................................................9 2.2. Vietnamese literature on the impacts of changing population structures on economic growth in Vietnam:.....................................................13 2.3. Research gap ........................................................................................15 2.4. Conclusion ............................................................................................17 CHAPTER 3: METHODOLOGY .........................................................................18 3.1. Overall Quantitative Analysis and the Econometrics......................18 3.2. Regression Model ................................................................................19 3.3. Index calculation .................................................................................24 3.4. Expected signs of Variables ................................................................24 3.5. Hypothesis ............................................................................................25 3.6. Conclusion ............................................................................................25 CHAPTER 4 DATA ................................................................................................27 4.1. Data collection .....................................................................................27 4.2. Data Descriptive ..................................................................................27 4.3. Conclusion ............................................................................................28 CHAPTER 5: ESTIMATION RESULT ...............................................................29 5.1. Impact of changing on working-age population on GRDP per capita: 30 i 5.2. Impact of other factors on GRDP per capita: ..................................31 5.3. Conclusion: ..........................................................................................32 CHAPTER 6: POLICY RECOMMENDATIONS ..............................................34 6.1. Policy recommendations: ...................................................................34 6.2. Limitations: ..........................................................................................35 6.3. Conclusion ............................................................................................36 REFERECES ...........................................................................................................37 ii LIST OF FIGURES Figure 2.1: An example of life-cycle surplus Figure 3.1: The LM test result Figure 3.2: The Hausman test result i Page 14 18 19 LIST OF TABLES Table 1.1. Total population and 15-64-year-old population’s growth rate from 1990 to 2050 Table 1.2. TFR and Percentage of youth people to total population from 1989 to 2018 Table 1.3. Global population aging trend Table 2.1. Bloom and Williamson (1998)’s variables Table 2.2. Mikiko (2015)’s variables Table 2.3. Compare and contrast to previous research papers Table 3.1. Independent and Dependent Variables’ definition and source Table 3.2. Dummy Variables for Areas Table 3.3. Expected signs of Variables Table 4.1. Descriptive statistics of variables Table 5.1. Estimation Result ii Page 1 2 3 10 11 16 20 23 25 27 29 LIST OF ABBREVIATIONS Order 1. Abbreviations CH 2. 3. 4. 5. FDI FE GDP GOV 6. 7. 8. GRDP GSO LM 9. 10. 11. 12. 13. 14. 15. 16. 17. MRD NCC NMM NTA PCI RE RRD SE VCCI 18. VJU Full word Central Highlands Foreign direct investment Fixed Effect Gross Domestic Product Government of the Socialist Republic of Viet Nam Gross Regional Domestic Product General Statistics Office of Vietnam The Breusch and Pagan Lagrangian multiplier Mekong River Delta North Central and Central coastal Northern midlands and mountain National Transfer Accounts Provincial Competitiveness Index Random Effect Red River Delta South East Vietnam Chamber of Commerce and Industry Vietnam Japan University iii ACKNOWLEDGEMENTS After two years of hard-studying in Vietnam Japan University, finally, I could finish my thesis successfully. Firstly, I would like to give the sincerest thanks to my supervisors, Prof. Moges Abu Girma and Dr. Vu Hoang Linh. Moges-sensei had supported me when I was an internship in Japan, while Dr. Linh has helped me a lot when I went back Hanoi to continue writing my thesis. The most difficulty I have to deal with is that I have no experience in doing academic research, especially quantitative methods, how and where to collect the data, as well as testing the model. But Dr. Linh has guided me step by step to overcome these challenges. Without both supervisor's guidance and their support, I could not do my thesis successfully. Secondly, I would like to say thanks to Dr. Nguyen Thuy Anh, Dr. Dang Quang Vinh, Prof. Naohisa Okamoto, Ms. Nguyen Thu Ha, and Ms. Pham Lan Huong, who from the office of MPP of VJU. They always support and encourage me when I study in VJU. Last but not least, I would like to thank all the staffs of Tsukuba University who supported MPP 3rd intake students during the internship in Japan. They were willing to help us in every situation from the first day we came until the last minute we left Japan. They bring us a lot of joyful moments and unforgettable memories, not only in term of studying experience but also the lifestyle and discovering the culture of Japan. I might add that two years studying in VJU, including the three months' internship in Japan, is the most fabulous time in my life. Thanks to the Vietnamese government and the Japanese government has brought this lucky chance for me to obtain a Master of Public Policy's course in VJU. iv CHAPTER 1: INTRODUCTION 1.1. Research background 1.1.1. Vietnamese population’s overview Vietnam is a developing country with 94,6 million people, and around 55,3 million people in working-age1. This number accounted for 58,5% of the total population. Table 1.1. Total population and 15-64-year-old population’s growth rate from 1990 to 2050 1990 2000 2010 2020 2030 2040 2050 Total population 67,9 79,9 88,8 96,2 104,16 107,7 109,6 Growth rate 9% 18% 11% 10% 7% 3% 2% Population 15-64yo 38,7 49,5 61,4 61,1 69,6 70,8 68,3 Growth rate 12% 28% 24% -0.5% 14% 2% -4% Source: WDI and UN Table 1.1 above illustrates the total population and the population aged 15 to 64year-old and their growth rate from 1990 to 2050 in Vietnam. According to Probabilistic Population Projections of United Nations (UN), the growth rate of the total population of Vietnam will slow down. It will decline gradually from 10% in 1 Statistical Yearbook of Vietnam 2018 - GSO 1 2020 to 3% in 2040 and reach only 2% in 2050. The growth rate of the population aged 15 to 65-year-old have rapidly decreased from 14% to minus 4% in 2050. It means that the people of Vietnam will experience growth slowly while the number of the labor force is falling in the next 30 years. There are three critical points in the population policies during the past 40 years, which lead to the dynamic change in the population structure in Vietnam: reducing birth rate and death rate, and focusing on improving people's quality of life. These policies had led to the decrease in the Total Fertility Rate while the life expectancy was increasing. Table 1.2. TFR and Percentage of youth people to total population from 1989 to 2018 1989 1999 2009 2018 Total Fertility rate 3.8 2.33 1.93 2.04 Population aged 014 (% of total population) 39.2 33.0 24.5 23.1 Sourse: Collected from Vietnam Population and Housing census year 1989, 1999, 2009, 2018 Table 1.2 above shows that in 1989, a female in the child-bearing ages gave birth to 3.8 children, but in 2018 this figure was only 2.04 children. This fall in TFR resulted in a rapidly decreasing percentage of youth population, down from 39.2% in 1989 to 23.1% in 2018. On the other hand, Vietnam has rapid population aging, and the aging process in Vietnam is as quick as the process in Japan and China. 2 Table 1.3. Global population aging trend Country Population Aged 65 and Above (% of Total) 7% 10% 14% 20% Years Taiwan 1993 2006 2018 2026 33 Japan 1970 1984 1994 2005 35 South Korea 1999 2007 2017 2026 27 Singapore 1999 2012 2018 2026 27 China 2000 2016 2025 2035 35 France 1864 1943 1990 2019 155 Germany 1932 1951 1971 2008 76 UK 1929 1946 1975 2026 97 US 1942 1972 2013 2029 87 Vietnam 2016 2025 2035 2050 34 Source: World Population Prospects “Year” column in Table 1.3 shows the entire year of a country transforms from an aging population to an aged population country. According to UNFPA, the socalled “aging population” period is when the proposition of people aged 65+ to the total population accounts for 7% or more. And “aged population” period happened when the proposition of 65-year-old or more population reaches 20% to the total population. It takes only 34 years for Vietnam to become a country with aged population in 3 which the old-age dependency ratio reach 20%. Based on the data shown in Table 1.3, Asian countries such as Taiwan, Japan, Singapore, and Vietnam has a quicker process of aging than American and European countries. The rapidly aging process will bring an additional burden to the working-age population, which is the primary resource for economic growth. 1.1.2. Population policies in Vietnam: Population policies are legislations, management programs, and other government activities that aim to change or adjust current population trends for the growth and prosperity of the Nation. Depending on specific objectives and situation, the Government will issue policies and laws to guide and regulate the process of population development. The Vietnamese Government has soon realized the vital role of the population to the social-economic growth. Council of Ministers (now is called Government of the Socialist Republic of Viet Nam - GOV) issued the first population policy of Vietnam – The Decision No. 216/CP on 26th December 1961; guiding the childbearing with the aim of mothers' maternal health, for the welfare and harmony of the family, so that the parenting can be thoughtful, the female procreation is appropriately instructed. Later on, the seventh National Party Congress (from 1991 to 1996) - The Central Committee of the Communist Party of Vietnam considers population activities and family planning are an essential part of National development strategies, as well as a critical factor in enhancing the life quality of each Vietnamese people, family, and community as a whole. In the next period, several solutions were implemented simultaneously. For example, GOV formulated a Population - Family Planning Strategy period from 1993 to 2000 and 2001 to 2010 and 2011 to 2020, and the newest is "Vietnamese 4 Population Strategy to 2030". The Strategy was issued on 22nd November 2019 in the Decision No. 1679/QD-TTg, signed by Prime Minister Nguyen Xuan Phuc. The overall goal of this Strategy is maintaining the replacement fertility rate; controlling the sex ratio at birth to natural equilibrium; taking advantage of the golden age population effectively; adapting to population aging; reasonably distributing the population density and improving the quality of population to contribute to rapid and sustainable national development. For effective implementation, the Strategy clarifies eight objectives to be done until 2030, which are: - Objective 1: Maintain a replacement fertility rate firmly, reducing fertility disparities between regions and entities. - Objective 2: Protect and develop the population of ethnic minorities with less than 10 thousand people, especially these ethnic minorities that are at a high risk of rapidly declining their population. - Objective 3: Control the sex ratio at birth to the natural balance, strive to maintain the age structure at a reasonable level. - Objective 4: Improve the quality of the population. - Objective 5: Distribute the community reasonably and ensure National defense and security. - Objective 6: Complete the construction and operation of the national database on population, accelerate the integration of population factors into the formulation and implementation of socio-economic development plans. - Objective 7: Maximize the golden-age population structure's advantages, creating a strong motivation for the country's rapid and sustainable development. - Objective 8: Adapting to the aging population, promoting health care for the elderly. 5 1.2. Problem statement In the previous part, an introduction to the current status of the population, the Vietnamese population’s policies, and the Strategy to 2030 of Vietnam are shown. It can be seen that, in the context of Vietnam in the near future, the decline of working-age population combines with the rapidly aging process will make the working-age population will become the limited resource and get additional burden. In addition, although Vietnam has transformed from an emerging country to a lowmiddle-income country recently, Vietnam needs to use the labor workforce in an effective and wise way in order to grow faster and to avoid the middle-income trap. Therefore, deeply understanding the relations between the changing economically active population structure and economic growth is needed. In this thesis, the correlation between population, dependent population, and the Vietnamese economy will be examined with the more updated longitudinal data by utilizing quantitative methods. 1.3. Purpose of the study There are two major purposes of this study. The first purpose is to estimate the impact of population structures’ change on economic growth using quantitative method with provincial data. The second purpose is to propose appropriate policies to utilize human resources effectively, as well as to promote sustainable economic growth in Vietnam. 1.4. Research questions This research is going to answer the two major questions: 1) How does the working-age population structure influence economic growth in Vietnam? And to what extent? 6 2) What should the Vietnamese government do to utilize the population resource effectively? 1.5. Research method The thesis uses the quantitative approach with provincial data. The time scope is from 2011 to 2017. Data of all variables are collected from GSO, except PCI, which is obtained from VCCI. The secondary data obtained from GSO and VCCI is analyzed by applying the Random Effect model, the relations between GRDP and the change in the workingage population's structure will be explored. Inside the model, the working-age population and dependent population were considered as the primary explanatory variable, while other factors such as PCI, life expectance at birth, working hour, FDI, and vice versa are considered as the control variables. There are dummy variables in the model to explore the difference between the six areas of Vietnam. 1.6. Significance of the study This thesis contributes two significant points: Firstly, the thesis uses the most updated database available that were collected from the GSO – a trustworthy Vietnamese data source. Hence, the estimation result of this thesis illustrates the most updated situation of the population and the economic growth of Vietnam. Secondly, the previous Vietnamese papers mostly use national-scales data to estimate the population's impact on economic growth, while this thesis uses provincial-scales data for analysis. 1.7. Thesis’ structure: There are six major parts in this thesis: Introduction, Literature review, Methodology, Data, Estimate results, and Policy Recommendations. 7 Chapter 01: Introduction – in this chapter, an overview of the population in Vietnam, population policy, and the necessary information of this thesis, such as research purposes, research questions, research methods, and study’s contributions are introduced briefly. Chapter 02: The literature review concentrates on showing the previous academic works on this topic in the past. This chapter is divided into three central parts. At first, the international papers in the related subject are briefly described and then move on to Vietnamese papers, which is exploring the relationship between population and economic growth. After reviewing the previous documents, both internationally and domestically, I discuss the research gap. Chapter 03: Research Methodology – This chapter discusses the methodology and introduces the model used in the thesis. Moreover, the reason for choosing the model and variables, and the explanation of some variables will be described in more details. The two hypotheses of this thesis are also discussed. Chapter 04: Data – this chapter focusses on the description of the data collection step by step. The data used for analyzing will be described in details. Chapter 05: Estimation result – in which the Random Effect model is used. The discussion of the result is divided into two main parts. In the first part, the impact of the change in the working-age population on the economic growth based on the correlation coefficient of the primary explanatory variable on the dependent variable after running the model. In the second part, I discuss the impact of other factors in the economic growth model. Chapter 06: Policy Recommendations – in this chapter, some policy recommendations will be given. The suggestions of these policies are for both the local and the central government. 8 CHAPTER 2: LITERATURE REVIEW This chapter includes three major parts: reviewing the literature from Vietnamese papers and literature from international articles, which focuses the links between population and economic growth. In the 3rd part of this chapter, the research gaps are shown. 2.1. International literature on the impacts of changing population structures on economic growth: Throughout the world, the question of whether or not population growth affects economic growth is raised by both demographers and economists. In the past, various points of view regarding the impacts of population growth on development have appeared. Coale & Hoover (1958) believe that an increase in the population harms growth. While Simon (1981) – one of the optimists, believes that a population increase leads to positive economic growth. However, the change in the population age structure due to demographic transition has various social and economic implications. Several studies explore the vital role of changing population structure on economic growth by cross-country data. The first paper that should be mentioned is the paper of David E. Bloom and Jeffrey G. Williamson (1998). The paper estimates the impact of demographic variables on economic growth, and the results show that future demographic change will tend to depress growth rates in East Asia, while it will promote more rapid economic growth in Southeast and South Asia. This model is considered the first model, in which the demographic variables was taken into account. ̃ ( ) This formulation focuses on both the total population and the working-age population. 9 Table 2.1. Bloom and Williamson (1998)’s variables Order 1 Variable Calculation method Growth rate of real GDP per capita in 1965-90 ̃ ̃ N: total population, L: the number of workers, y: output per worker and ̃ : output per capita 2 3 ( ) Income per worker at time Growth rate of economically active population, 1965-90 4 5 Population growth rate, 1965-90 - - - Population: + Growth rate of population under age 15 + Growth rate of population over age 64 + Growth rate of the dependent population + Average birth rate, 1967-87 + Average death rate, 1967-87 + Average infant death rate, 1967-87 + Average noninfant death rate, 1967-87 + Log life expectancy, 1960 Education: + Log years of secondary schooling, 1965 (average years of secondary school for population age 25 or older) Economy: + Log GDP per capita as a ratio of U.S GDP per 10 Order Variable Calculation method capita, 1965 + Government savings as a share of GDP, 1970-90 Other: + Natural resource abundance (share of primary product exports in GDP in 1971) + Access to ports dummy (indicating if the country is landlocked) + Openness + Tropics dummy (indicating if country is located between the tropics) + Ratio of coastline to land area + Quality of institutions (index of quality of governmental institutions) - The model proposed by Bloom & Williamson (1998) is considered as guidance for identifying the primary relationship between population composition and economic change. Based on this model, Mikiko (2015) develops a regression equation to explore how the population composition by age group related to real GDP per capita in Japan and to explore how the dependency ratio related to economic change. In her equation is: ( )= ( )+ ( )+ ( )+ t: the time index j: a lag value of 0 or 1 Table 2.2. Mikiko (2015)’s variables Order 1 Variable Calculation method Growth rate of real GDP per capita in 1965-90 11 Order Variable Calculation method ̃ N: total population, L: the number of workers, and ̃ : output per capita 2 3 Population by age group (15-24, 25-34, 35-44, 4554, 55-59, 60-64, 65-69, 70-74, 75+) or Youth and elderly dependency ratios. Control variable: , - Level of schooling, Density Working hours Manufacturing share Female labour Employment labour Employment Mikiko (2015) applied the data from Japan for the period 1975-2011. The results are impressive. She divides the elderly population into three groups, ages 65-69, 7074, 75+. The coefficients between these groups and real GDP per capita are negative. However, the results illustrate that the 70-74 population age groups have a negative link to economic growth, while the 75+ age group has a positive relation with Japanese economic change. Bloom & William (1998) divide the population into three groups such as young population, working-age population, and elderly population, but Mikiko (2015) divides the population into more group (11 groups), hence her research could explore more which age groups are associated with the increase or decrease in economic growth. 12