Migration and Structural Transformation in China
Since China’s 1978 economic reform, its agricultural employment share decreased from 69% to 17% in 2015 over 37 years. In contrast, this level of reduction in agricultural employment share took the US 104 years to achieve. This paper uncovers that China’s rapid sectoral labor reallocation was helped by mass migration from Western to Eastern regions. In the late 1990s, the former small-scale migration within the Eastern region was replaced by mass West to East migration. This mass cross-region and cross-sector migration is the major contributing factor for the Eastern region’s rapid non-agricultural employment growth, making the region an engine of structural transformation. The 2010s saw an increase in out-of-agriculture reallocation in the West, accelerating the Western region’s nonagricultural sectoral growth. To understand how migration contributes to structural transformation and economic growth, I build a two-sector two-region model and study how migration mitigates labor market distortion both between sectors and across regions over the period 1978-2015. Although the sectoral and regional migration barriers have declined over time, the potential output and welfare gain from removing the remaining migration barriers are still high.
The Effect of Migration Policy on Growth, Structural Change, and Regional Inequality in China with Ruiqi Sun, Trevor Tombe and Xiaodong Zhu, published on Journal of Monetary Economics 2020
China’s impressive economic growth since 2000 is well known; its significant structural transformation and regional income convergence is less so. Since 2000, while its aggregate income quadrupled, the inequality across provinces fell by a third and the share of employment in agriculture fell in half. Worker migration is central to this transformation, with almost 280 million workers living and working outside their area of (hukou) registration by 2015. Combining rich individual-level data on worker location and occupation decisions from 2000 to 2015 with a spatial general equilibrium model of China’s economy, we quantify the size and consequences of reductions in internal migration costs. We find that between 2000 and 2015 migration costs fell in half, with the cost of moving from agricultural rural areas to nonagricultural urban ones falling even more. In addition to contributing to growth, these migration cost changes account for the majority of the reallocation of workers out of agriculture and the drop in regional inequality. We compare the effect of migration policy changes with other important economic factors in China, including change in trade costs, capital market distortions, average cost of capital, and productivity. While each contributes meaningfully to growth, migration policy is central to China’s structural change and regional convergence. Finally, we find the slow-down in growth between 2010 and 2015 is associated with smaller reduction in inter-provincial migration costs and a larger role of capital accumulation during this five-year period.
More Unequal yet More Alike, the Changing Patterns of Family Formation, Generational Mobility and Household Income Inequality in China: A Counter-factual Analysis with Gordon Anderson and Maria Grazia Pittau, published on Journal of Economic Inequality, 2018 January (paper)
China’s household income inequality has grown steadily over the last 30 years. While many analyses focus on the effects of policies relating to urban-rural and inland-coastal distinctions, growth in inequality has prevailed on both sides of those respective divides suggesting something more fundamental is at play. Here, certain patterns of family formation and human capital transfer are shown to engender increases in household income inequality measures. A unique data set, linking grandparents, parents and children, yields evidence of structural change toward such patterns over successive cohorts of households. Influenced by such events as the Cultural Revolution, the One Child Policy and the Economic Reforms, people intensified positive assortative matching behaviors and polarizing human capital transitions. Social class designations became less important and educational class designations became more important. A counterfactual analysis verified the impact of these changes on household income inequality in urban China, revealing increasing similarity between cohorts amidst growing inequality.
Bold and Brotherless: The Effects of China’s Family Planning Policies on Women’s Career Outcomes with Limin Fang and Genet Zinabou