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Labor Market Developments in China: A Neoclassical View

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  • Ge, Suqin

    (Virginia Tech)

  • Yang, Dennis T.

    (University of Virginia)

Abstract

This paper assesses the applicability of two alternative theories in understanding labor market developments in China: the classical view featuring a Lewis turning point in wage growth versus a neoclassical framework emphasizing rational choices of individuals and equilibrating forces of the market. Empirical evidence based on multiple data sources fails to validate the arrival of the Lewis turning point in China, showing continuous and coordinated wage growth across rural and urban sectors instead. Consistent with the neoclassical view, we find that rural workers expanded off-farm work when mobility restrictions were lifted, interprovincial migration responded to expected earnings and local employment conditions, and returns to education converged gradually to the international standard. These findings suggest major progresses in the integration of labor markets in China.

Suggested Citation

  • Ge, Suqin & Yang, Dennis T., 2010. "Labor Market Developments in China: A Neoclassical View," IZA Discussion Papers 5377, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5377
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    More about this item

    Keywords

    wage growth; labor markets; rural-urban migration; Lewis turning point; schooling returns; China;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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