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Labor market distortions, rural-urban inequality and the opening of China's economy

Listed author(s):
  • Hertel, Thomas
  • Zhai, Fan

This paper evaluates the impact of some key labor market reforms on rural-urban inequality and income distribution, using a household-disaggregated, recursive dynamic computable general equilibrium (CGE) model of China. We also explore how these factor market reforms interact with product market reforms currently underway as part of China’s WTO accession process. The simulation results show that the reforms in rural land rental market and Hukou system, as well as increasing off-farm labor mobility would reduce the urban-rural income ratio dramatically. Furthermore, the combination of WTO accession and factor market reforms improves both efficiency and equality significantly.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(05)00069-6
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 23 (2006)
Issue (Month): 1 (January)
Pages: 76-109

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Handle: RePEc:eee:ecmode:v:23:y:2006:i:1:p:76-109
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Shaohua Chen & Martin Ravallion, 2004. "Welfare Impacts of China's Accession to the World Trade Organization," World Bank Economic Review, World Bank Group, vol. 18(1), pages 29-57.
  2. Zhao, Yaohui, 1999. "Labor Migration and Earnings Differences: The Case of Rural China," Economic Development and Cultural Change, University of Chicago Press, vol. 47(4), pages 767-782, July.
  3. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, May.
  4. William L. Parish & Xiaoye Zhe & Fang Li, "undated". "Nonfarm Work and Marketization of the Chinese Countryside," University of Chicago - Population Research Center 95-6, Chicago - Population Research Center.
  5. Yaohui Zhao, 1999. "Leaving the Countryside: Rural-to-Urban Migration Decisions in China," American Economic Review, American Economic Association, vol. 89(2), pages 281-286, May.
  6. Tao Yang, Dennis, 1997. "China's land arrangements and rural labor mobility," China Economic Review, Elsevier, vol. 8(2), pages 101-115.
  7. Wang, Zhi & Zhai, Fan, 1998. "Tariff Reduction, Tax Replacement, and Implications for Income Distribution in China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 358-387, June.
  8. Kanbur, Ravi & Zhang, Xiaobo, 2001. "Fifty Years Of Regional Inequality In China: A Journey Through Revolution, Reform And Openness," Working Papers 7236, Cornell University, Department of Applied Economics and Management.
  9. Wang, Xiaolu & Kalirajan, K. P., 2002. "On explaining China's rural sectors' productivity growth," Economic Modelling, Elsevier, vol. 19(2), pages 261-275, March.
  10. Ianchovichina, Elena & Martin, William, 2003. "Economic impacts of China's accession to the World Trade Organization," Policy Research Working Paper Series 3053, The World Bank.
  11. Fan Zhai & Zhi Wang, 2002. "WTO Accession, Rural Labour Migration and Urban Unemployment in China," Urban Studies, Urban Studies Journal Limited, vol. 39(12), pages 2199-2217, November.
  12. Anderson, Kym & Huang, Jikun & Ianchovichina, Elena, 2003. "Long-run impacts of China's WTO accession on farm-nonfarm income inequality and rural poverty," Policy Research Working Paper Series 3052, The World Bank.
  13. Li Shantong & Zhai Fan, 2002. "China's WTO Accession and Implications for its Regional Economies," Economie Internationale, CEPII research center, issue 92, pages 67-102.
  14. John Whalley & Shunming Zhang, 2004. "Inequality Change in China and (Hukou) Labour Mobility Restrictions," NBER Working Papers 10683, National Bureau of Economic Research, Inc.
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