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Fiscal Decentralization, Rural Industrialization, and Undocumented Labor Mobility in Rural China (1982-87)

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  • Chen, Yiu Por (Vincent)

    () (University of California, San Diego)

Abstract

This paper explores the relationship between fiscal decentralization, which gave greater rural industrialization and fiscal authority to local governments, and the emergence of rural-rural undocumented inter-provincial labor migration during China's initial reform period. A Heckman model is employed to correct for the zero observation problems and to consistently estimate the labor mobility with a modified gravity equation. Given the institutional barriers, the fiscal decentralization has two contending effects on labor market integration: Local economic development promotes labor mobility, but local public goods crowding restrains the inflow of labor at the destination. The crowding effect is stronger at lower levels of government.

Suggested Citation

  • Chen, Yiu Por (Vincent), 2015. "Fiscal Decentralization, Rural Industrialization, and Undocumented Labor Mobility in Rural China (1982-87)," IZA Discussion Papers 9024, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp9024
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    More about this item

    Keywords

    fiscal decentralization; local economic development; local public goods; rural labor mobility;

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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