The Puzzle of Migrant Labour Shortage and Rural Labour Surplus in China

The Puzzle of - ISSN 1471-0498 DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES THE PUZZLE OF MIGRANT LABOUR SHORTAGE AND RURAL LABOUR SURPLUS IN

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ISSN 1471-0498 DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES THE PUZZLE OF MIGRANT LABOUR SHORTAGE AND RURAL LABOUR SURPLUS IN CHINA John Knight, Deng Quheng and Li Shi Number 494 July 2010 Manor Road Building, Oxford OX1 3UQ
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1 The Puzzle of Migrant Labour Shortage and Rural Labour Surplus in China John Knight 1, 2 , Deng Quheng 3 and Li Shi 2 1. Department of Economics University of Oxford OX1 3UQ [email protected] 2. School of Economics and Business Administration Beijing Normal University Beijing [email protected] 3 . Institute of Economics, Chinese Academy of Social Sciences B e i j i n g [email protected] July 2010 Corresponding author : John Knight. The research was conducted while John Knight was visiting Beijing Normal University.
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2 The Puzzle of Migrant Labour Shortage and Rural Labour Surplus in China Abstract The paper examines the contentious issue of the extent of surplus labour that remains in China. China was an extreme example of a surplus labour economy, but the rapid economic growth during the period of economic reform requires a reassessment of whether the second stage of the Lewis model has been reached or is imminent. The literature is inconclusive. On the one hand, there are reports of migrant labour scarcity and rising migrant wages; on the other hand, estimates suggest that a considerable pool of relatively unskilled labour is still available in the rural sector. Yet the answer has far-reaching developmental and distributional implications. After reviewing the literature, the paper uses the 2002 and 2007 national household surveys of the Chinese Academy of Social Sciences to analyse and explain migrant wage behaviour, to predict the determinants of migration, and to examine the size and nature of the pool of potential rural-urban migrants. An attempt is also made to project the rural and urban labour force and migration forward to 2020, on the basis of the 2005 one per cent Population Survey. The paper concludes that for institutional reasons both phenomena are likely to coexist at present and for some time in the future. Key words : China; demographic transition; labour market; Lewis turning point; migrant wages; migrant workers; surplus labour JEL classification : J11; J31; J61; O11; O17
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3 1. Introduction The famous Lewis model (Lewis, 1954) provides a good framework for evaluating the success of a developing economy, and for explaining the ways in which the fruits of economic development are spread. Within a competitive market economy, it is only when the economy emerges from the first, labour-surplus, classical stage of the development process and enters the second, labour-scarce, neo-classical stage that real incomes begin to rise generally. Up to that point the benefits of economic growth can accrue in the form of the absorption of surplus labour and not in the form of generally rising real incomes. Beyond that point the scarcity of labour can be a powerful force for the reduction of inequality in labour income. The process by which an
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This note was uploaded on 06/09/2011 for the course ECON econ 1001 taught by Professor Wong during the Fall '09 term at HKU.

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The Puzzle of - ISSN 1471-0498 DEPARTMENT OF ECONOMICS DISCUSSION PAPER SERIES THE PUZZLE OF MIGRANT LABOUR SHORTAGE AND RURAL LABOUR SURPLUS IN

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