CoPS/IMPACT Working Paper Number G-189

Title: Estimating the size of rural labour surplus in China - A dynamic general equilibrium analysis

Authors: Yinhua Mai and Xiujian Peng


China's dramatic economic growth during the past three decades is characterised by rapid industrialisation that was fuelled by a large pool of rural surplus labour in the agricultural sector. The large scale movement of labour from the agricultural to the industrial and services sectors witness in recent years raises pertinent questions about its sustainability: is there still a pool of surplus labourers in rural China? If there is, how large is that pool and how long can it last? These questions are hotly debated in China. The present study contributes to that discussion by providing a quantitative framework to estimate the size of the surplus labour under various scenarios. Applying a dynamic general equilibrium model of the Chinese economy, we present our estimates of the size of the rural labour surplus from 1997-2005 and forecast its size from 2006-2015. Two scenarios are presented in this paper, one is business-as-usual; the other with accelerated improvement of labour productivity in China's agricultural sector.

JEL classification: J21, C53.

Keywords:China, rural labour surplus, agriculture labour productivity, CGE model.

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