Leading Dragon Phenomenon: New Opportunities for Catch-up in Low-Income Countries

Vandana Chandra, Lin Yifu & Wang Yan

Abstract: Modern economic development is accompanied by the structural transformation from an agrarian to an industrial economy. Since the 18th century, all countries that industrialized successfully have followed their comparative advantages and leveraged the latecomer advantage, including emerging market economies such as the People's Republic of China (PRC), India, and Indonesia. The current view is that Chinese dominance in manufacturing hinders poor countries from developing similar industries. We argue that rising labor cost is causing the PRC to graduate from labor-intensive to more capital-intensive and technology-intensive industries. This will result in the relocation of low-skill manufacturing jobs to other low-wage countries. This process, which we call the “leading dragon phenomenon,” offers an unprecedented opportunity to low-income countries. Such economies can seize this opportunity by attracting the rising outward foreign direct investment flowing from Brazil, the PRC, India, and Indonesia into the manufacturing sectors. All low-income countries can compete for the jobs spillover from the PRC and other emerging economies, but the winner must implement credible economic development strategies that are consistent with its comparative advantage.

Keywords: structural transformation, Asia, Africa, The People's Republic of China, the flying geese pattern

JEL Classification：B10, O10, O14, O25

Relax the One-child policy and the long-term potential growth rate in China

Lu Yang & Cai Fang

Abstract: Using a new data set from NBS and a population data set estimated by Guo (2013), we estimate the average annual growth rate of potential output to be 7.55 percent in the 12th Five-year Plan period and 6.2 percent over the 13th Five-year Plan period. The labor force participation rate and nature rate of unemployment is a function of population structure in our model. Due to the fast demographic change in China in the future, the average annual growth rate of potential output will slowdown to 5.41% during 2021 to 2025, and it will slow down to below 5% after 2026, and below 4% after 2040. The long-term potential growth rate will increase if the total fertility rate could in the short turn increase to 1.77 and above.

Keywords: demographic structure, potential growth rate, labor force participation rate, natural rate of unemployment

JEL Classification: O47, J21, C53

Current Situation of Rural Migrant Workers in the Chinese Labor Market

Li Shi

Abstract: The paper describes the current situations of migrant workers in terms of employment opportunities, wage income growth, entitlement to social security and housing conditions, and thus assesses the process of integration of urban and rural labor markets in China. The paper presents the latest results from varying data analysis, indicating that there have been significant improvements in employment opportunities, wage growth and wage equality for rural-migrant workers, but the improvement in their social security has not been obvious, and their housing conditions almost no improvement in recent years. The main conclusion is that the economic and social conditions of rural-migrant workers determine the integration process of China's labor market, the process of new-type urbanization and urban social harmony and stability, and thus to rapidly improving the economic and social status of rural-migrant workers is a priority for the Chinese governments.

Keywords: rural-migrant workers, employment, wage, social security

JEL Classification: J3, J7, O15

A Re-estimation of China’s Urban-Rural Employment and Urbanization Ratio

Wang Xiaolu & Wan Guanghua

Abstract: In this article, the authors scrutinize the official statistics on China’s urban and rural employment as well as urban and rural population. After carefully analyzing data from various sources, it is found that the national census data of 2010 understate the number of rural-urban migrant workers, implying underestimation of urban employment by 47 million and urbanization ratio by 3% percentage points in 2012. Nevertheless, large rural-urban migration is expected to continue, particularly with gradual removal of various institutional barriers. With imminent reforms to the infamous household registration, social security and public services systems, the urbanization ratio could gain at least 10 percentage points in the next ten years.

Keywords: urbanization ratio，rural-urban migration，Lewis turning point

JEL Classification：J61，R12，R23，P25

The Effects of Hukou System Reform on Rural and Urban Household Income--A Dynamic General Equilibrium Analysis

Peng Xiujian, Mai Yinhua & He Yu

Abstract: Applying a dynamic general equilibrium modelling approach and by decomposing rural and urban households’ income, this paper explores the effects of further reform of the Hukou registration system on China’s economic growth and income inequality between rural and urban households. The simulation results show that the reduction of institutional barriers will enhance the movement of rural labour from agricultural and non-agricultural sectors to urban sectors. The increased labor movement will boost China’s economic growth and the relatively faster increase in the wage payment to the rural residents will narrow rural urban income gap. Even through the wage level of rural migrants will be slightly lower than the baseline case, they are paid considerably better than agricultural and rural non-agricultural workers. 

Keywords: hukou system, rural-urban migration, income inequality, labor market, CGE modelling

JEL Classification: J61, R23, C68

The Effect of Statistical Methods on the Estimation of Urban-Rural Income Gap and Its Re-calculation

Zhao Wen & Zhang Zhanxin

Abstract: The urban-rural income gap is overestimated because of the under-estimation of wage income of rural residents caused by statistical omission and the overestimation of per capita income of urban residents caused by survey range error. The reason for such omission and error are related. This paper analyzes the impact of different investigation methods, based on outflow and inflow areas, on estimating the statistical income. By re-calculating the income gap between rural residents and urban residents between 2001 and 2009 and deviation caused by various investigation methods, we provide a new perspective on understanding the status and role of adjusting the income gap. By combining population employment structure provided by the outflow method, and the individual income data provided by the inflow method, we are able to get more accurate income information of rural migrants. The result is more reasonable to judge the income gap between urban and rural areas.

Keywords: urban-rural income gap, rural migrant worker, statistical method

JEL Classification: C42, D31, O15

Changes of Wage Differential between Monopolized and Competitive Industries in China: Based on the Perspective of Wage Distribution

Jiang Li, Guo Jiqiang & Lu Lili

Abstract: Based on the data from China’s Urban Household Survey in 1988, 1995, 2002 and 2009, we investigate the changes in wage differential between monopoly industries and non-monopoly industries. We find that the wage differentials in middle and low quantile (20-40 quantile) slightly narrow while the wage differential in high quantile is increasing constantly. With the further application of FFL distribution decomposition method, we find that more than 50% of the wage differential between monopoly industries and non-monopoly industries cannot be explained, in which the part that cannot be explained in middle and low quantile (10quantile) is as high as about 70%. The proportion of the part that cannot be explained in the wage gap between monopoly industries and non-monopoly industries lowered after 1995 but the decrease of the part that cannot be explained in the low quantile (10quantile) was the minimum. Those results indicate that the administrative monopoly power still play an important role in the determining of wages in monopoly industries.

Keywords: monopoly industries, wage distributional differentials, FFL decomposition, unexplained part

JEL Classification：J31, J42, J48

Wage and Wage Equation in Urban Chinese Labor Market: A Literature Review

Zhang Ke & Zhao Zhong

Abstract: The paper review major economic studies on wage and wage equation of Chinese urban labor market during its transition from a planning economy to a market economy. It focuses on the role of education, experience, gender, communist party membership, ownership, industry and region in the wage determination in China. Based on the review, it points out limitations of current studies and suggesst direction for future research.

Keyword: urban labor market, wage, Mincer wage equation, China

JEL Classification:    J31, J24, P22

Employment Crisis Faced by Labor with Lower Education:Evidence from Urban Jiangsu Province

Sun Jingfang

Abstract: This paper takes urban Jiangsu province as an example, analyzes requirement on human capital and influences on wage when technical advance is main source of economic growth by Probit-model and Heckman two step model. Findings are as follows: employment’s probability of labor with lower education is lower, and the relative wage continuously decreases; income of 36 year old married male labor with primary can’t make himself escape from poverty, with junior high school degree just can make 2 persons escape from poverty, which maybe let the whole family in poverty. Political suggestions are proposed with the fact average educational degree of rural migrant is less than junior high school degree: supply job training for rural migrant with lower education to improve employment’s ability; decrease educational cost for rural school-age children to promote human capital’s accumulation.

Keywords: lower education; employment; poverty; rural migrant

JEL Classification: J21, J23, J24