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Rural-urban disparity and sectoral labour allocation in China

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  • Dennis Tao Yang
  • Hao Zhou

Abstract

This study examines China's rural-urban segmentation and its causes in the context of economic reforms. Household survey and aggregate data indicate a V-shaped process in which rural-urban consumption and income differentials decreased between 1978 and 1985, but then have continually increased to historically high levels. This sectoral division is consistent with production function estimates based on provincial data that reveal higher labour productivity in urban/state-owned industries than in rural industries and agriculture. To explain the V-shaped change, we argue that the precedent of successful rural reforms raised farmers' relative earnings, but the remaining obstacles to an efficient sectoral allocation of labour have prevented China from eliminating dualism. Recent financial policies consisting of urban price subsidies and increased investment credits have also had influential distribution effects that are biased against the rural sector.

Suggested Citation

  • Dennis Tao Yang & Hao Zhou, 1999. "Rural-urban disparity and sectoral labour allocation in China," Journal of Development Studies, Taylor & Francis Journals, vol. 35(3), pages 105-133.
  • Handle: RePEc:taf:jdevst:v:35:y:1999:i:3:p:105-133 DOI: 10.1080/00220389908422575
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    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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