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 Research background 1.2 Problem statement 1.3 Purpose of the study 1.4 Research questions 1.5 Research method 1.6 Significance of the study .7 1.7 Thesis’ structure: CHAPTER 2: LITERATURE REVIEW 2.1 International literature on the impacts of changing population structures on economic growth: 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 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 10 11 16 20 23 25 27 29 LIST OF ABBREVIATIONS Order Abbreviations CH FDI FE GDP GOV GRDP GSO LM 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 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 Statistical Yearbook of Vietnam 2018 - GSO 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 dum_North_Center_and_CCA 0 0 dum_Red_River_Delta 0 0 dum_South_East_Area 0 0 0 0 0 Northern midlands mountain 3.3 and Index calculation (1) (2) (3) (4) 3.4 Expected signs of Variables Based on the Economic Theory and the results of previous paper mentioned in Chapter 2, Literature Review, there are expected signs’ coefficients of variables between GRDP per capita and independent variables which are shown in the following table: 24 Table 3.3 Expected signs of Variables Variables Sign Variables Sign ln_wa_population + lnagri_share + lndepend_pop - lntrain_employed + lndensity - pci + lnindustry_share + FDI + lifeexpectancy + femalelabour + Working_Hours + Note: the variables which have its name start with “ln” are in natural logarithm forms 3.5 Hypothesis In this thesis, there are two alternative hypotheses tested, which are: H1 The change in the working-age population has positive changes in GRDP per capita Another hand, H2 The increase in the number of dependent people, including older people and youth, will lead to a decrease in the GRDP per capita 3.6 Conclusion In this chapter, the methodology which is applied in this thesis is shown in detail The RE model is being used to analyze longitudinal data of 63 provinces/cities of 25 Vietnam, which is described in the next chapter The application is STATA ver.16.0 There are two main explanatory variables, eight control variables, and five dummy variables for areas included in the model The detail of the data is illustrated in the next chapter 26 CHAPTER DATA 4.1 Data collection There were three steps used to collect the data related to the population as well as data of GRDP of 63 provinces, cities of Vietnam: - Step 1: Noted down all the variables could be included in the model after reviewing all the material such as books, previous papers, articles on this topic - Step 2: Separate the potential variables into two catalogs: The variables could be downloaded directly from GSO, and other websites and variables have to be calculated by hand - Step 3: All the data was put into an excel file, calculated the needed variables by using some simple formulas After that, all the data is imported to STATA to analyze Due to the limited data source, several expected variables could not be found to include in the model For example, the labor force data from 15-year-old and above divided to age group by province, or employed population from 15-year-old and above by kinds of economic activity by province 4.2 Data descriptive Table 4.1 Descriptive statistics of variables Variable Obs Mean Std.Dev Min Max ln_GRDPperca 441 17.12736 0.5383683 16.17327 19.34776 ln_wa_population 441 13.47139 0.5511029 12.20407 15.30072 lndepend_pop 441 13.0641 0.6095831 11.38168 15.20895 lndensity 441 5.674356 0.9888792 3.758872 8.31801 27 lnindustry_share 441 -1.214073 0.4605735 -2.14475 -0.1347058 lnagri_share 441 -1.607707 0.8285776 -4.945346 -0.6076715 lntrain_employed 441 2.722177 0.3805621 pci 441 58.84549 FDI 441 femalelabour Working_Hours Province/City Year 1.629241 3.758872 3.88742 45.12 73.53 371.4664 802.1101 -7.4 6745.4 441 76.85578 34.15619 7.8 771 441 44.07982 2.754076 34 51.9 63 The following table illustrates the description of the data which is collected and used in this thesis The data included 441 observations; there is no missing observation Therefore, the data is a perfect balance The time scale is seven years, from 2011 to 2017 4.3 Conclusion In this chapter, the process of data collection and description of the data are explained in detail All the data comes from the Statistical Yearbook of Vietnam, Statistical Yearbook of each province and cities, Report on Labour Force Survey which were published by GSO, exclude the data of PCI which is collected from the website: https://pcivietnam.vn owned by Vietnam Chamber of Commerce and Industry (VCCI) All the data are collected at the provincial level in years from 2011 to 2018 There are 63 provinces and cities in Vietnam Therefore, the number of observations is 441 28 CHAPTER 5: ESTIMATION RESULT By using STATA application version 16.0, the estimation result of longitudinal data by RE method is shown in the following table: Table 5.1 Estimation Result Random Effects Model Model VARIABLES ln_wa_population 0.116** (0.0570) lndepend_pop lndensity lnindustry_share lnagri_share lntrain_employed -0.139** (0.0584) 0.215*** (0.0294) -0.637*** (0.0310) 0.120*** (0.0174) PCI lifeexpectancy FDI femalelabour 0.228*** (0.0144) 3.32e-06 (2.63e-06) -2.91e-05 (6.19e-05) Working_Hours dum_North_Center_and_CCA dum_Mekong_River_Delta dum_Red_River_Delta -0.368*** (0.0921) -0.203 (0.127) -0.621*** 29 0.126** (0.0568) -0.0791 (0.0482) -0.0900 (0.0611) 0.223*** (0.0295) -0.623*** (0.0324) 0.117*** (0.0174) 0.00261*** (0.000799) 0.216*** (0.0145) 6.84e-06** (2.82e-06) -2.49e-05 (6.06e-05) -0.00221*** (0.000858) -0.330*** (0.0919) -0.189 (0.125) -0.618*** VARIABLES dum_South_East_Area dum_Central_Highlands Constant R-squared Observations Number of id_province Standard errors in parentheses *** p