LM Integration WTO Entry

Regional Labor Market Integration since China’s WTO Entry: 

Regional Labor Market Integration since China’s WTO Entry Cai Fang Du Yang Zhao Changbao

1. Introduction : 

1. Introduction

LM Integration as Key Task of Reform: 

LM Integration as Key Task of Reform For an economy in transition, development of the market is a sign of a successful transition and a premise for a sustainable economic growth. Development and integration of labor markets are key components that indicate the move towards a market system

Disagreements about FM Integration: 

Disagreements about FM Integration Factors market reform lagged behind commodity market (Lardy 1994) “Border effect” generated by decentralization reinforced market segmentation (Poncet 2001, 2003; Young 2000) Deepening reform increases marketization, leading to FM (incl. LM) integration (Fan & Wang 2001, 2004; Cai & Du 2004)

Three Paths to LM Integration: 

Three Paths to LM Integration As development phenomenon – process of economic growth and overall market development (common practice for developing economies) As transitional phenomenon – result of transition from plan to market (way out for planning system) As outside arrangement – result of formation of common market (NAFTA, EU members)

China Has All Three Drives: 

China Has All Three Drives As a developing country, China trying to catch up with its forthgoers As a transition country, China moving towards market economy As a new entrant of WTO, China fulfilling its commitments that are consistent with market development

China Set Excellent Study Case: 

China Set Excellent Study Case China has 30 years successful reform and built up its framework of market system China gone through relatively complete process of dual economy development and meeting its Lewis turning point China is in its 7th year of WTO entry

2. A Summary of LM Reform: 

2. A Summary of LM Reform

Annals of LM Reform: 

Annals of LM Reform

Two Approaches to Reforming: 

Two Approaches to Reforming Non-public sectors absorb workforce from labor market (migrant workers and reemployed workers) Public sector (i. e. SOEs) deregulates pressured by competition from non-public sectors (gradually breaking iron-rice-bowl)

3. Rural-urban Migration: 

3. Rural-urban Migration

Migrant Workers in Urban LM: 

Migrant Workers in Urban LM

Growth & Spatial Distr. of Migrants : 

Growth & Spatial Distr. of Migrants

Changing Distribution of Rural Labor: 

Changing Distribution of Rural Labor

4. Convergence of Migrant Wage: 

4. Convergence of Migrant Wage

Examining Wage Convergence: 

Examining Wage Convergence Wage converge between regions implies a trend of labor market integration that is similar to the integration of the product market, reflected by the law of one price

Why Migrants’ Wage?: 

Why Migrants’ Wage? In Cai and Du (2004), we already found a trend of convergence of manufacturing wage among Chinese regions Migrants are more mobile and their wage is more market-determined Long complaints about stagnation of migrant wage Migrants represent unskilled workers, shortage of which shows Lewis turning point

Data: 

Data From survey by Research Center of Rural Economy, in the Ministry of Agriculture, including 20,000 households distributed through 300 villages. Information includes education, age, gender and health status. A complementary labor survey provides more information about labor migration

Wage Inequality Measures : 

Wage Inequality Measures

Decomposition by Province: General Entropy : 

Decomposition by Province: General Entropy

Theil Decomposition Based on Regression: 

Theil Decomposition Based on Regression

5. Conclusions : 

5. Conclusions

Summary of the Presentation: 

Summary of the Presentation After accession to WTO, China’s reform and opening has intensified in a way consistent with globalization. By breaking up the iron-rice-bowl and eliminating hukou-related institutional barriers, more jobs created for rural and urban labor, creating institutional and structural conditions for LM integration, which is proven by wage convergence of migrants

Lewisian Turning Point?: 

Lewisian Turning Point? Dramatic decline in share of working age population Labor shortage spread nation-wide There are not many rural laborers in surplus Urban unemployment rate declined Wages in both formal and informal sectors increase rapidly

Challenges Facing China: 

Challenges Facing China How can government efforts conform the changing direction of labor market: Hukou system and related reforms Public services coverage of migrants New Countryside Campaign encourage laborers’ mobility instead of keeping them in land