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Unemployment and urban poverty in China: a case study of Guangzhou and Tianjin

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  • Shujie Yao

    (Middlesex University Business School, London, UK)

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    Abstract

    Recent reforms on state-owned enterprises have led to millions of workers retrenched. This paper presents two theoretical models, one to explain why firms have to lay-off workers, and the other to explain how redundancy can affect poverty. Both first-hand and official survey data are used to examine how redundancy has affected the living standards and poverty of urban households. It is estimated that about one-fifth of the current urban poverty has been caused by the redundancy programme. The survey results have a number of interesting findings, which have important policy implications. It is concluded that the pressure to lay-off workers was due to excessively high wages and the cessation of soft budget. The probability of a household falling into poverty depends not only on the probability that household members are retrenched, but also on the probability that retrenched workers can find alternative employment. Most affected households do not think the reform is wrong, but they are pessimistic about their future. The government is thought to be ineffective in helping retrenched workers, and poverty is to become a permanent feature of urban China, an ironic phenomenon that was unthinkable even before the economic reforms started in 1978. Copyright © 2004 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jid.1058
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 16 (2004)
    Issue (Month): 2 ()
    Pages: 171-188

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    Handle: RePEc:wly:jintdv:v:16:y:2004:i:2:p:171-188

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    Web page: http://www3.interscience.wiley.com/journal/5102/home

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    1. Riskin, Carl, 1994. "Chinese Rural Poverty: Marginalized or Dispersed?," American Economic Review, American Economic Association, vol. 84(2), pages 281-84, May.
    2. McMillan, John & Naughton, Barry, 1992. "How to Reform a Planned Economy: Lessons from China," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 130-43, Spring.
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    4. Dong, Xiao-Yuan & Putterman, Louis, 2003. "Soft budget constraints, social burdens, and labor redundancy in China's state industry," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 110-133, March.
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    7. Knight, J. & Lina, S., 1990. "The Determinants Of Urban Income Inequality In China," Economics Series Working Papers 9991, University of Oxford, Department of Economics.
    8. Meng,Xin, 2009. "Labour Market Reform in China," Cambridge Books, Cambridge University Press, number 9780521121118, April.
    9. Jefferson, Gary H., 1989. "Potential sources of productivity growth within Chinese industry," World Development, Elsevier, vol. 17(1), pages 45-57, January.
    10. Lau, Kam-Tim & Brada, Josef C., 1990. "Technological progress and technical efficiency in Chinese industrial growth: A frontier production function approach," China Economic Review, Elsevier, vol. 1(2), pages 113-124.
    11. Jyotsna Jalan & Martin Ravallion, 1999. "China's Lagging Poor Areas," American Economic Review, American Economic Association, vol. 89(2), pages 301-305, May.
    12. Johnson, D Gale, 1988. "Economic Reforms in the People's Republic of China," Economic Development and Cultural Change, University of Chicago Press, vol. 36(3), pages S225-45, Supplemen.
    13. Groves, Theodore, et al, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 183-209, February.
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