The economic effects of facilitating the flow of rural workers to urban employment in China

Using a dynamic computable general equilibrium model of the Chinese economy we investigate the economic effects of relaxing China's household registration system over the period 2008 to 2020. The modelling results show that reducing the institutional restriction to rural labour movement will encourage rural workers to move from agricultural and rural non†agricultural sectors into urban sectors. This enhanced labour movement will not only increase China's GDP and real consumption of households but it will also raise the real wages of agricultural and rural non†agricultural workers. Although the real wage of rural migrant workers will increase at a slightly lower rate than in the baseline scenario, rural migrant workers remain considerably better paid than agricultural and rural non†agricultural workers.