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Labor reallocation in China: 1978–2011

  • Lei, Chaochao
  • Zhang, Rengui
  • Wu, Baocheng
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    This paper develops a three-sector model to analysis the mechanism of cross sectoral labor reallocation in China over the period of 1978–2011. The model incorporates factors of sectoral differences in productivity, non-homothetic preference characteristics of consumers, and institutional barriers of labor mobility. Moreover, the model considers changes in the scale of the public sector as an important driving force. We find that there are two effects of changes in the scale of the public sector in declining public sector output on labor reallocation. First, enterprises will increase the share of capital input to labor, resulting in relative expansion of non-agricultural production. Second, residents' income will also increase, together with the relative increase in demand towards non-agricultural goods due to non-homothetic preference characteristics of consumers. Therefore the non-agricultural production will further expand.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0264999313003428
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    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 35 (2013)
    Issue (Month): C ()
    Pages: 668-673

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    Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:668-673
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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    1. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
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