Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy
The authors evaluate the impact of two key factor market distortions in China on rural-urban inequality and income distribution. They find that creation of a fully functioning land market has a significant impact on rural-urban inequality. This ref...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/11/5506009/labor-market-distortions-rural-urban-inequality-opening-chinas-economy http://hdl.handle.net/10986/14199 |
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okr-10986-141992021-04-23T14:03:21Z Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy Hertel, Thomas Zhai, Fan ACCOUNTING AGRICULTURE BASE YEAR CAPITAL GOODS CONSTANT RETURNS TO SCALE COST OF LIVING DEMAND CURVES ECONOMETRIC ANALYSIS ECONOMETRIC ESTIMATES ECONOMIC ACTIVITY ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC WELFARE ELASTICITIES ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPLOYMENT EQUILIBRIUM EXPORTS FOREIGN EXCHANGE FUTURE RESEARCH GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GINI COEFFICIENT GROWTH RATE HOUSING IMPORT TARIFFS IMPORTS INCOME INCOME DISTRIBUTION INCOME INEQUALITY INCOME LEVELS LABOR FORCE LABOR MARKET LABOR MARKETS LABOR MOBILITY LABOR SUPPLY LAND SUPPLY LAND TENURE LIVING CONDITIONS MARGINAL COST MARGINAL PRODUCT MARGINAL VALUE MARKET DISTORTIONS MARKET ECONOMIES MARKET PRICES MARKET WAGE MIGRATION OIL OPPORTUNITY COST OPTIMAL ALLOCATION OPTIMIZATION PRICE CHANGES PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PRODUCTIVITY PROFITABILITY PROPERTY RIGHTS QUOTA RENTS QUOTAS REAL WAGES REGRESSION ANALYSIS RENTS SOCIAL COSTS SOCIAL SERVICES TAX RATES TAX REFORM TAXATION TERMS OF TRADE TOTAL FACTOR PRODUCTIVITY TRADE LIBERALIZATION TRANSACTIONS COSTS TRANSFER PAYMENTS TRANSPORT URBAN URBAN AREA URBAN AREAS URBAN COST OF LIVING URBAN ECONOMIES URBAN ECONOMY URBAN EMPLOYMENT URBAN LABOR URBAN SECTOR WAGE DIFFERENTIALS WAGES WELFARE GAINS WORLD TRADE ORGANIZATION WTO The authors evaluate the impact of two key factor market distortions in China on rural-urban inequality and income distribution. They find that creation of a fully functioning land market has a significant impact on rural-urban inequality. This reform permits agricultural households to focus solely on the differential between farm and non-farm returns to labor in determining whether to work on or off-farm. This gives rise to an additional 10 million people moving out of agriculture by 2007 and lends a significant boost to the incomes of those remaining in agriculture. This off-farm migration also contributes to a significant rise in rural-urban migration, thereby lowering urban wages, particularly for unskilled workers. As a consequence, rural-urban inequality declines significantly. The authors find that reform of the Hukou system has the most significant impact on aggregate economic activity, as well as income distribution. Whereas the land market reform primarily benefits the agricultural households, this reform's primary beneficiaries are the rural households currently sending temporary migrants to the city. By reducing the implicit tax on temporary migrants, Hukou reform boosts their welfare and contributes to increased rural-urban migration. The combined effect of both factor market reforms is to reduce the urban-rural income ratio dramatically, from 2.59 in 2007 under the authors' baseline scenario to 2.27. When viewed as a combined policy package, along with WTO accession, rather than increasing inequality in China, the combined impact of product and factor market reforms significantly reduces rural-urban income inequality. This is an important outcome in an economy currently experiencing historic levels of rural-urban inequality. 2013-06-26T16:21:50Z 2013-06-26T16:21:50Z 2004-11 http://documents.worldbank.org/curated/en/2004/11/5506009/labor-market-distortions-rural-urban-inequality-opening-chinas-economy http://hdl.handle.net/10986/14199 English en_US Policy Research Working Paper;No.3455 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific China |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING AGRICULTURE BASE YEAR CAPITAL GOODS CONSTANT RETURNS TO SCALE COST OF LIVING DEMAND CURVES ECONOMETRIC ANALYSIS ECONOMETRIC ESTIMATES ECONOMIC ACTIVITY ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC WELFARE ELASTICITIES ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPLOYMENT EQUILIBRIUM EXPORTS FOREIGN EXCHANGE FUTURE RESEARCH GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GINI COEFFICIENT GROWTH RATE HOUSING IMPORT TARIFFS IMPORTS INCOME INCOME DISTRIBUTION INCOME INEQUALITY INCOME LEVELS LABOR FORCE LABOR MARKET LABOR MARKETS LABOR MOBILITY LABOR SUPPLY LAND SUPPLY LAND TENURE LIVING CONDITIONS MARGINAL COST MARGINAL PRODUCT MARGINAL VALUE MARKET DISTORTIONS MARKET ECONOMIES MARKET PRICES MARKET WAGE MIGRATION OIL OPPORTUNITY COST OPTIMAL ALLOCATION OPTIMIZATION PRICE CHANGES PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PRODUCTIVITY PROFITABILITY PROPERTY RIGHTS QUOTA RENTS QUOTAS REAL WAGES REGRESSION ANALYSIS RENTS SOCIAL COSTS SOCIAL SERVICES TAX RATES TAX REFORM TAXATION TERMS OF TRADE TOTAL FACTOR PRODUCTIVITY TRADE LIBERALIZATION TRANSACTIONS COSTS TRANSFER PAYMENTS TRANSPORT URBAN URBAN AREA URBAN AREAS URBAN COST OF LIVING URBAN ECONOMIES URBAN ECONOMY URBAN EMPLOYMENT URBAN LABOR URBAN SECTOR WAGE DIFFERENTIALS WAGES WELFARE GAINS WORLD TRADE ORGANIZATION WTO |
| spellingShingle |
ACCOUNTING AGRICULTURE BASE YEAR CAPITAL GOODS CONSTANT RETURNS TO SCALE COST OF LIVING DEMAND CURVES ECONOMETRIC ANALYSIS ECONOMETRIC ESTIMATES ECONOMIC ACTIVITY ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC WELFARE ELASTICITIES ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPLOYMENT EQUILIBRIUM EXPORTS FOREIGN EXCHANGE FUTURE RESEARCH GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GINI COEFFICIENT GROWTH RATE HOUSING IMPORT TARIFFS IMPORTS INCOME INCOME DISTRIBUTION INCOME INEQUALITY INCOME LEVELS LABOR FORCE LABOR MARKET LABOR MARKETS LABOR MOBILITY LABOR SUPPLY LAND SUPPLY LAND TENURE LIVING CONDITIONS MARGINAL COST MARGINAL PRODUCT MARGINAL VALUE MARKET DISTORTIONS MARKET ECONOMIES MARKET PRICES MARKET WAGE MIGRATION OIL OPPORTUNITY COST OPTIMAL ALLOCATION OPTIMIZATION PRICE CHANGES PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PRODUCTIVITY PROFITABILITY PROPERTY RIGHTS QUOTA RENTS QUOTAS REAL WAGES REGRESSION ANALYSIS RENTS SOCIAL COSTS SOCIAL SERVICES TAX RATES TAX REFORM TAXATION TERMS OF TRADE TOTAL FACTOR PRODUCTIVITY TRADE LIBERALIZATION TRANSACTIONS COSTS TRANSFER PAYMENTS TRANSPORT URBAN URBAN AREA URBAN AREAS URBAN COST OF LIVING URBAN ECONOMIES URBAN ECONOMY URBAN EMPLOYMENT URBAN LABOR URBAN SECTOR WAGE DIFFERENTIALS WAGES WELFARE GAINS WORLD TRADE ORGANIZATION WTO Hertel, Thomas Zhai, Fan Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy |
| geographic_facet |
East Asia and Pacific China |
| relation |
Policy Research Working Paper;No.3455 |
| description |
The authors evaluate the impact of two
key factor market distortions in China on rural-urban
inequality and income distribution. They find that creation
of a fully functioning land market has a significant impact
on rural-urban inequality. This reform permits agricultural
households to focus solely on the differential between farm
and non-farm returns to labor in determining whether to work
on or off-farm. This gives rise to an additional 10 million
people moving out of agriculture by 2007 and lends a
significant boost to the incomes of those remaining in
agriculture. This off-farm migration also contributes to a
significant rise in rural-urban migration, thereby lowering
urban wages, particularly for unskilled workers. As a
consequence, rural-urban inequality declines significantly.
The authors find that reform of the Hukou system has the
most significant impact on aggregate economic activity, as
well as income distribution. Whereas the land market reform
primarily benefits the agricultural households, this
reform's primary beneficiaries are the rural households
currently sending temporary migrants to the city. By
reducing the implicit tax on temporary migrants, Hukou
reform boosts their welfare and contributes to increased
rural-urban migration. The combined effect of both factor
market reforms is to reduce the urban-rural income ratio
dramatically, from 2.59 in 2007 under the authors'
baseline scenario to 2.27. When viewed as a combined policy
package, along with WTO accession, rather than increasing
inequality in China, the combined impact of product and
factor market reforms significantly reduces rural-urban
income inequality. This is an important outcome in an
economy currently experiencing historic levels of
rural-urban inequality. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Hertel, Thomas Zhai, Fan |
| author_facet |
Hertel, Thomas Zhai, Fan |
| author_sort |
Hertel, Thomas |
| title |
Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy |
| title_short |
Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy |
| title_full |
Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy |
| title_fullStr |
Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy |
| title_full_unstemmed |
Labor Market Distortions, Rural-Urban Inequality, and the Opening of China's Economy |
| title_sort |
labor market distortions, rural-urban inequality, and the opening of china's economy |
| publisher |
World Bank, Washington, D.C. |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2004/11/5506009/labor-market-distortions-rural-urban-inequality-opening-chinas-economy http://hdl.handle.net/10986/14199 |
| _version_ |
1764430891262672896 |