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Understanding China's Lewis Turning Point: The Role of Regional Heterogeneity

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  • Annie Wei

    (Crawford School of Public Policy, The Australian National University)

  • Fung Kwan

    (Department of Economics, University of Macau)

Abstract

The question of whether China has reached the Lewis turning point (LTP) has recently been intensively debated in the literature. Partly, this is due to the profound policy implication of the turning point posited by Lewis (1954) and Ranis and Fei (1961), while it is also closely related to the growing concern of ChinaÕs growth sustainability. Various empirical approaches and criteria have been applied in the literature and greatly contributed to the diverse findings on the questions of ChinaÕs LTP. In this paper, we carefully review the approaches applied in the existing studies and revisit the question by applying the wage-productivity approach which is most closely to the theoretical definition of LTP and the core criterion recommended by Minami (1968). Moreover, we examine the regional heterogeneity of ChinaÕs LTP which has long been neglected in the literature but shall have significant policy implications to ChinaÕs regional economic development. Our results show that in ChinaÕs Eastern provinces, the marginal product of labour has increased rapidly and outpaced agricultural incomes by 2002 for the earliest and 2008 for the latest. In Central China, most provinces included in the sample of our study have passed the LTP by the mid to late 2000s except for Jiangxi province. In contrast, half of the examined provinces in Western China have not yet passed the turning point. The regional heterogeneity of the LTP can be explained by diverse levels of economic development of ChinaÕs regions. It also indicates that China should adopt heterogeneous industrial policies across regions.

Suggested Citation

  • Annie Wei & Fung Kwan, 2014. "Understanding China's Lewis Turning Point: The Role of Regional Heterogeneity," Crawford School Research Papers 1408, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:crwfrp:1408
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    Cited by:

    1. Prema-chandra Athukorala & Zheng Wei, 2015. "Economic Transition and Labour Market Dynamics in China: An Interpretative Survey of the ‘Turning Point’ Debate," Departmental Working Papers 2015-06, The Australian National University, Arndt-Corden Department of Economics.
    2. Prema†chandra Athukorala & Zheng Wei, 2018. "Economic Transition And Labour Market Dynamics In China: An Interpretative Survey Of The €˜Turning Point’ Debate," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 420-439, April.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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