Urban-Rural Disparity in Post-reform China

Transcription

1 Urban-Rural Disparity in Post-reform China Prepared for China Rural Development Center Mi DIAO Ming GUO Hirotoshi OTSUBO Zhijun TAN Hongliang ZHANG September 9, 2004 MIT J Analysis & Acct Regional Economic Change 1

2 Phenomenon (1) Average Living Expenditure in Rural and Urban China: (Unit: RMB) 8,000 7,000 6,000 5,000 4,000 Rural Urban 3,000 2,000 1, Sources: SSB (1999) Comprehensive Statistical Data and Materials on 50 Years of New China, Beijing: China Statistics Press September 9, 2004 MIT J Analysis & Acct Regional Economic Change 2

3 Phenomenon (2) Urban-Rural Consumption Ratio ( ) Ratio Year Sources: SSB (1999) Comprehensive Statistical Data and Materials on 50 Years of New China, Beijing: China Statistics Press September 9, 2004 MIT J Analysis & Acct Regional Economic Change 3

4 Outline Theoretical Framework Pre-reform Urban-Rural Institutional Arrangement Urban-Rural Disparity in the Post-reform Period Policy Implications September 9, 2004 MIT J Analysis & Acct Regional Economic Change 4

5 Theoretical Framework: Two-sector Economic Development Lewis Model (1954) Unlimited supply of labor from rural area Labors are unskilled and of equal quality Free migration and labor market Marginal productivity law principle Harris and Todaro Model (1970) Unemployment in urban sector Knight Model (1999) Average productivity law principle in rural China September 9, 2004 MIT J Analysis & Acct Regional Economic Change 5

6 Theoretical Framework: the Urban Bias Model Harris-Todaro Model Lewis Model Rural supply Urban demand W u W c Urban Unemployment Rural labor force Urban employment 0 Total Labor force 0* September 9, 2004 MIT J Analysis & Acct Regional Economic Change 6

7 Theoretical Framework: Equilibrium Outcomes in the Model Improvement in terms of rural-urban trade Inter-sectoral transfer of labor Eventual improvement of inter-sectoral equality in labor income September 9, 2004 MIT J Analysis & Acct Regional Economic Change 7

8 Pre-reform Urban-Rural Disparity: Urban Bias Policy (1) Inter-sectoral trade Scissors Price: Distorted price structure in favor of the urban sector Inter-sectoral capital transfer Exploiting the agriculture sector to accelerate industrialization Urban labor market Above-equilibrium urban wage Surplus jobs in the state sector Overstaffing and underemployment September 9, 2004 MIT J Analysis & Acct Regional Economic Change 8

9 Pre-reform Urban-Rural Disparity: Urban Bias Policy (2) Rural labor market Equal land sharing policy in rural sector Rural labor income is based on average productivity Violation of marginal principle Sharing disguised unemployment as underemployment among the rural labor force Inter-sectoral labor transfer Strict restrictions on rural-urban migration Household registration system (hukou) September 9, 2004 MIT J Analysis & Acct Regional Economic Change 9

10 Post-reform Convergence ( ): Golden Age for Rural China Land contract system reform in rural area ignited the shocking increase in rural productivity Price reform in favor of the agriculture goods Sharp increase in the procurement price Rural industrialization Start-up of township and village enterprises September 9, 2004 MIT J Analysis & Acct Regional Economic Change 10

11 Three Sectors' Share of GDP in China ( ) 60.0% 50.0% Percentage 40.0% 30.0% 20.0% Agriculture Industrial Tertiary 10.0% 0.0% Year September 9, 2004 MIT J Analysis & Acct Regional Economic Change 11

12 Post-reform Widening Disparity (after 1985): Restrictions on rural-urban migration No integrated national labor market Discrimination on rural migrants in urban areas Private sector development in urban area Compete with TVEs for capital, market, etc. September 9, 2004 MIT J Analysis & Acct Regional Economic Change 12

13 Post-reform Widening Disparity (after 1985): Supply of rural surplus labor is below the market equilibrium level Rural labor supply (to urban) is based on average productivity, rather than marginal productivity Peasants are not entitled with land alienation rights The urban wage is set above market equilibrium level Education disparity Urban and rural labors are of different quality September 9, 2004 MIT J Analysis & Acct Regional Economic Change 13

14 Rural-Urban Disparity in Education: Years of Schooling Source: Knight, John and Lina Song The Rural-Urban Divide: Economic Disparities and Interactions in China, New York: Oxford University Press. September 9, 2004 MIT J Analysis & Acct Regional Economic Change 14

15 Rural-Urban Disparity in Education: Educational Attainment Urban Rural Below Primary 5.9% 28.8% Primary 13.5% 32.5% Lower-secondary 36.5% 29.8% Upper-secondary 22.5% 7.5% Technical institute 16.0% 0.9% College or above 11.7% 0.5% Source: Knight, John and Lina Song The Rural-Urban Divide: Economic Disparities and interactions in China, New York: Oxford University Press. September 9, 2004 MIT J Analysis & Acct Regional Economic Change 15

16 Rural-Urban Disparity in Education: Dualistic Financing System Decentralized education funding system Dualistic system on education financing September 9, 2004 MIT J Analysis & Acct Regional Economic Change 16

17 Policy Implications: Further relax household registration system Centralize the education funding system to provide rural residents equal education opportunity Entitle rural residents the interim land alienation right Remove discrimination on providing education, health, social security, and housing to rural migrants Remove the current expatriation policy in large cities September 9, 2004 MIT J Analysis & Acct Regional Economic Change 17

18 Selected References [1] Byrd, William and Qingsong Lin, eds China s Rural Industry: Structure, Development, and Reform, Oxford: Oxford University Press for the World Bank. [2] Knight, John and Lina Song The Rural-Urban Divide: Economic Disparities and Interactions in China, New York: Oxford University Press. [3] Lewis, W. Author Economic development with unlimited supplies of labor, Manchester School of Economic and Social Studies, 22, 2: [4] SSB Comprehensive Statistical Data and Materials on 50 Years of New China, Beijing: China Statistics Press [5] Yang, Dennis Tao and Hao Zhou Rural-urban disparity and sectoral labor allocation in China, The Journal of Development Studies 35,3: [6] Harris, John R. and Michael P. Todaro "Migration, Unemployment, and Development: A Two-Sector Analysis," American Economic Review, Vol. 60, No. 1 (March), pp September 9, 2004 MIT J Analysis & Acct Regional Economic Change 18