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Labor reallocation in China: 1978–2011

Author

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  • Lei, Chaochao
  • Zhang, Rengui
  • Wu, Baocheng

Abstract

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.

Suggested Citation

  • Lei, Chaochao & Zhang, Rengui & Wu, Baocheng, 2013. "Labor reallocation in China: 1978–2011," Economic Modelling, Elsevier, vol. 35(C), pages 668-673.
  • Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:668-673
    DOI: 10.1016/j.econmod.2013.08.026
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    References listed on IDEAS

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    1. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
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    Cited by:

    1. Mishra, Vinod & Smyth, Russell, 2015. "Estimating returns to schooling in urban China using conventional and heteroskedasticity-based instruments," Economic Modelling, Elsevier, vol. 47(C), pages 166-173.

    More about this item

    Keywords

    Labor reallocation; Productivity differences; Non-homothetic preference; Mobility costs;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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