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China's Rural Enterprises: Effects of Agriculture, Surplus Labor, and Human Capital

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  • Peng, Yusheng

Abstract

Rural industry is the most dynamic sector in China. I argue that rural industrialization is funded by agricultural accumulation, driven by surplus labor, and sustained by human capital. Rural reforms since 1978 have allowed Chinese peasants to retain a larger share of agricultural surplus to be transferred into rural industries. Rural surplus labor and shortage of farmland drive rural industrialization by the dynamic of extensive growth. Education is crucial for rural industrialization because market competition raises returns to human capital and industries need schooling more than does agriculture. 1991 data of 1,903 counties show that the top 10% of the counties produced over half of the total output by rural enterprises whereas the bottom 50% contributed little. Regression analyses confirm the above argument and find that education is the strongest predictor of rural industrial development.

Suggested Citation

  • Peng, Yusheng, 1995. "China's Rural Enterprises: Effects of Agriculture, Surplus Labor, and Human Capital," Institute for Social Science Research, Working Paper Series qt4zc171bm, Institute for Social Science Research, UCLA.
    • Handle: RePEc:cdl:issres:qt4zc171bm
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    References listed on IDEAS

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    1. Fleisher, Belton M. & Liu, Yunhua & Li, Hongyi, 1994. "Financial intermediation, inflation, and capital formation in rural China," China Economic Review, Elsevier, vol. 5(1), pages 101-115.
    2. Knight, John & Song, Lina, 1993. "The Spatial Contribution to Income Inequality in Rural China," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 17(2), pages 195-213, June.
    3. Glenn Firebaugh & Jack P. Gibbs, 1986. "Using Ratio Variables to Control for Population Size," Sociological Methods & Research, , vol. 15(1-2), pages 101-117, November.
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    Cited by:

    1. Zai Liang & Yiu Por Chen & Yanmin Gu, 2002. "Rural Industrialisation and Internal Migration in China," Urban Studies, Urban Studies Journal Limited, vol. 39(12), pages 2175-2187, November.

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