Reaping the Dividends of Reforms on Hukou System. Du Yang

Transcription

1 Reaping the Dividends of Reforms on Hukou System Du Yang

2 In this presentation. Hukou System and Labor Mobily Migration, Productivy, and Economic Growth Data and Methodology Gains of Comprehensive Reforms in Hukou System Policy Discussions

3 The history of hukou system in China The household registration system is called hukou system in Chinese In 1958, the National People s Congress approved the Act of Household Registration System in China, which set up the hukou system Beyond a population management system, since then the hukou system has been gradually connected wh employment, social protection, and labor mobily, which has formed instutional barrier that blocks mobily across regions, and in particular, between rural and urban areas

4 The reforms on hukou system China kicked off the reforms on hukou system in 1980s by allowing the surplus labor from agriculture to work in off-farm sectors However, the reforms on registration system have only been implemented in small sized cies while the mega cies have been strictly control to entle people hukou The reforms have been implemented in local experiments even nationwide comprehensive reforms are needed to eliminate the instutional segmentation

5 So labor mobily dominates migration employment (mln, left) real wages (RMB, right)

6 Migration, Productivy, and Economic Growth

7 (%) Room to reallocation is smaller Contribution of Labor Reallocation to Economic Growth RMB per day hired labor in agriculture migrant workers

8 Migration, Productivy, and Growth Although the hukou system in China is unique, there exist a lot lerature on the impacts of immigration on local labor market Peri (2009) finds that immigration has posively affect the output growth and productivy improvement for the destination states in the U.S To some extent, labor mobily whout hukou is similar to the above case of immigration Previous discussions on hukou reforms in China pay too much attention to the cost of reforms while ignoring the potential gains of the reforms

9 Further reforms in hukou to drive growth Growth in total output comes from two sources, the increase in employment and the increase of output per worker The increase output per worker include the ratio of capal to output, average working time, skill intensy, and the TFP So we look at the production function of destination cies in the following form Kˆ ct Yˆ ct Lˆ ct yˆ ct Lˆ ct ( ) Aˆ ct xˆ 1 Y ct ct ˆ st

10 Productivy Improvement through Migration The migrant workers, even wh low skill, increase the degree of specialization in local labor market. Immigrants promote the local skills to allocate more on skill or knowledge intensive sectors Immigration increases the competiveness of local labor market The study on the U.S finds that half of TFP growth could be explained by immigration In this sense, would be helpful for big cies in China to improve productivy by allowing more migrants to move in even they are low skilled

11 Migration and Productivy In left hand side, bi represents a set of variables in cy i including total employment, the ratio of capal to output, K/Y, TFP, average working hours, index of skill intensy We are interested in the elasticy of each variable above, The major explanatory variable here is proportion of the change of migrant workers in total employment bˆ i b b L L i m i The instrumental variables are the size of pre-settled migrants and distance of rail way to the nearest regional transportation center i

12 Data

13 Output and Stock of Capal The data on output and capal stock at cy level are compiled from China Statistical Yearbook of Cies published by the NBS in various years The output is deflated by provincial GDP deflators so that we get the output at constant prices in 1990 The stock of capal at cy level is estimated using perpetual inventory. The inial level of the stock is assumed at K/Y=2; The annual investments are based on fixed asset investment; the depreciation rate is set at 9.6%

14 Migration and Employment Migrant workers are fined as workers who have worked in the cies more than 6 months but whout local hukou. This definion is consistent wh the one from the NBS The data are aggregated from the micro level data of 1% Population Sampling Survey in 2005 and the Sixth Population Census in 2010, both conducted by the NBS The variables we constructed from the datasets include employment at cy level, the share of migrant workers in total employment, weekly working hours of migrant workers and local workers Combing wh the education, we also calculate the share of working time of workers wh education above senior high school and the share of working time of workers wh education below senior high school

15 Wages and Index of Skill Intensy Using the following formula, we calculate the index of skill intensy to reflect the degree of skill biased technology. The wage information of workers wh different education is from the Urban Household Survey conducted by the NBS in 2005 and the elasticy of substution between skilled and unskilled workers is ( s ) [( s ) ((1 )(1 s )) ] 1 ( w s ) 1 s ( w 1 1 s ) 1 ( w l s ) (1 s ) 1 1

16 Total Factor Productivy Based on the variables we calculated above, combining wh stock of capal, output, share of workers wh education above senior high school, share of working time by education, total working time, wages of high and low skilled workers, we calculate the TFP at cy level in 2005 and 2010 respectively using the following formula A Y ( 1 1 K X 1 ( w ) s ) 1 [ w s s 1 1 s ( w w l l ) 1 (1 s (1 s )] 1 ) 1 1

17 Instrumental Variables The variable of pre-settled migrants is calculated from the 1% Population Sampling Survey in 2005 and the 6 th Population Census in 2010 The mileages of railway between sampled cies to the regional transportation center are obtained from the webse, checked cy by cy. We have six transportation center Shenyang for Northeast China, Beijing for North China, Chengdu for Southwest China, Xian for Northwest China, and Guangzhou for South China, and Shanghai for East China

18 Summary of Main Variables 2005(a) 2010(b) change(b-a) GDP (bln, 1990 price) 22(44) 40.8(79.4) 188 Employment (thousand) 713.4(952.4) 945.3(1469.1) Output per worker(thousand, 1990) 33.5(17.5) 43.2(19.3) 9.7 Share of migrant workers (%) 27.2 (23.4) 35.5(24.3) 8.3 Weekly working hours 47.8(3.64) 46.4(2.62) -1.4 Migrant workers 52.3(4.63) 49.7(3.05) -2.6 Local workers 46.1(3.07) 44.7(2.38) -1.4 Capal/Output 1.65(0.46) 2.12(0.62) 0.47 Output per hour (RMB) 17.33(8.75) 23.20(10.24) 5.87 TFP (RMB/hour) 5.94(9.39) 3.82(6.60) (0.05) 1.153(0.05) (0.177) 0.325(0.175) S (%) 16.3(8.4) 19.2(8.3) 2.9

19 Gains of Comprehensive Reforms in Hukou System

20 Main Regression Results OLS 2SLS Basis Lagged Dep. Basis Lagged Dep. Employment 1.08 (0.033) *** 1.10(0.034) *** 0.837(0.098) *** (0.077) *** Output per Worker (0.054) *** (0.05) *** (0.167) *** (0.306) ** Components of Output per Worker Output/capal (0.038) *** (0.037) *** (0.141) *** (0.136) *** TFP (0.099) *** (1.06) (0.291) *** (0.39) *** Working time (0.066) 0.026(0.057) (0.018) *** (0.018) *** Skill index.0003(.005) (0.047) (0.014) (0.012) Skill index (0.158) (0.370) (0.443) *** 0.139(0.352) S (0.064) (0.055) (0.183) *** 0.207(0.581) Num. of Obs

21 Increasing the Size of Labor Market First, the current labor shortage is short of unskilled worker, which implies that increasing supply of low skilled workers would help China to keep advantages labor intensive sectors and to by time for economic restructuring Second, in urban labor market there the skilled and unskilled workers are complementary. Migration promotes specialization in cies and increases productivy accordingly The existing experiences indicate that the polarized labor market would induce demand for unskilled workers The regression results show that the increase of size of employment would mainly determined by how much the migration is, as the elasticy is as high as 0.99

22 million Components of Rural Surplus Labor 25 Non-Migrants Migrants Age

23 Working time The average weekly working hours has been decreasing, mostly because of the decreasing working hours of urban local workers, accounted for 102% of the decrease The difference of working hours between migrant workers and local workers accounted for 28% of the decrease The share of migrant workers is posively associated wh working hours. The increased share of migrant workers result in an increase of 0.41 hour per week, accounting for 30% of the increase The regression result indicate that the overall effect of migration on working hours is limed, the elasticy is

24 Capal/Output Migration has significantly decreased the capal/output ratio, wh the elasticy of This result has the same sign of study on the states of the U.S (Peri, 2009) Considering that the previous economic growth in China heavily relied on investments and the ratio of capal to output has already been high level, as high as 2.12, lower the ratio would make the economic growth healthier and sustainable. This trend is also consistent wh the main policy direction China has already moved on

25 TFP From 2005 to 2010, the average TFP of cies dropped 36% while the economic growth pattern in the period is typically investment-led The estimation based on the 2SLS, migration did have posive effect on productivy improvement at cy level. Controlling for inial level of TFP, the elasticy is as high as 0.91 and statistically significant To check s robustness, we vary the value of parameters, for example the elasticy of substution, the results are consistent

26 Migration, Capal/Output, and Productivy

27 Potential Gains of Reforms on Hukou System Size of LM (%) TFP (%) K/Y (%) Working Hours (%) Net Gains (%) Net Gains (bln)

28 Policy Discussion

29 Policy Discussion It seems that the cost of reforms in hukou system are paid too much attentions in China, which de facto may block the procedure of the reforms. This study indicates that the benefs of the reforms are substantial In addion, a thorough and comprehensive reform in hukou system is helpful to develop a competive labor market. More importantly, will drive the Chinese economy in a healthy way by improving TFP Based on this empirical exercise, we expect to speed up the reforms on hukou system

30 What to be done in reforms? There are three components of hukou system, population management system, employment system, and social protection system Following the protocol of gradual reform, the easy parts are implemented first, which delinked employment wh hukou status The on-going reforms are going to separate the soicap protection from hukou system, which is the most difficult part and what also many studies on cost to focus on

31 How to reform A top-to-bottom design is needed A comprehensive plans are needed since the social protection is related to too many stakeholders Nationwide reforms rather than local practice The central government should take major responsibily for providing basic social protection so as to avoid the segmentation across regions