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China has reached the Lewis turning point

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Listed:
  • Zhang, Xiaobo
  • Yang, Jin
  • Wang, Shenglin

Abstract

In the past several years, labor shortages in China have become an issue. However, there is heated debate as to whether China has passed the Lewis turning point and moved from a period of unlimited supply to a new era of labor shortage. Most empirical studies on this topic focus on estimation of total labor supply and demand. Yet the poor quality of China's labor statistics leaves the debate open. In this paper, China's position along the Lewis continuum is examined though primary surveys of wage rates, which offer a more reliable statistic than employment data. Our results show a clear rising trend in real wage rates since 2003. The acceleration of real wages even in slack seasons indicates that the era of surplus labor is over. This finding has important policy implications for China's future development.

Suggested Citation

  • Zhang, Xiaobo & Yang, Jin & Wang, Shenglin, 2010. "China has reached the Lewis turning point," IFPRI discussion papers 977, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifprid:977
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    References listed on IDEAS

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    1. Kaushik Basu, 2003. "Analytical Development Economics: The Less Developed Economy Revisited," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262523442, December.
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    4. Fang Cai & Meiyan Wang, 2008. "A Counterfactual Analysis on Unlimited Surplus Labor in Rural China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 51-65, January.
    5. John Knight, 2007. "China, South Africa and the Lewis Model," CSAE Working Paper Series 2007-12, Centre for the Study of African Economies, University of Oxford.
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    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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