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Labour misallocation in China: 1980--2010

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  • Peiwen Bai
  • Wenli Cheng

Abstract

This article measures labour misallocation in Chinese provinces over the period 1980--2010 and investigates possible causal factors of the misallocation. It finds that: (1) labour misallocation fell substantially in the first half of 1980s, but there was no monotonic trend of improvement since then. (2) Wage differentials cross primary, secondary and tertiary sectors accounted for a substantial portion of measured overall labour misallocation; the secondary sector’s wage deviations from value of the marginal product of labour (VMPL) also contributed to labour misallocation. (3) There was persistence in labour misallocation, but a higher level of urbanization, the development of the tertiary sector, increasing trade openness and the growth of the nonstate sector appear to have contributed to more efficient labour allocation.

Suggested Citation

  • Peiwen Bai & Wenli Cheng, 2016. "Labour misallocation in China: 1980--2010," Applied Economics, Taylor & Francis Journals, vol. 48(25), pages 2321-2332, May.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:25:p:2321-2332
    DOI: 10.1080/00036846.2015.1119790
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    2. Qiao, Sen & Chen, Hsing Hung & Zhang, Rong Rong, 2021. "Examining the impact of factor price distortions and social welfare on innovation efficiency from the microdata of Chinese renewable energy industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).

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