Labor Force Participation and Structural Change

Structural transformation can affect not only where people work, but also whether they participate in market work. We study this margin in China, where rapid movement out of agriculture coincided with a large decline in labor force participation. Using census and rural household data, we show that the post-2000 decline was concentrated among rural indi- viduals and broad-based across demographic groups and regions. We develop a quantitative model in which rural household members choose between market work and home production, subject to mobility barriers. Quantitatively, the model closely matches the observed decline without targeting it: agricultural productivity growth releases labor from agriculture and substantially reduces participation, while non-agricultural productivity growth only partially offsets this effect, as mobility barriers limit labor reallocation.