Urbanization with Chinese Characteristics.pdf

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1、UrbanizationwithChineseCharacteristicsAbstract:As a result of substitution of capital for labor inagriculture and rigid demand of urban sectors for migrantworkers,the rural-to-urban migration becomes irreversibleprocess,and Todaro dogma,which aims to limit the migrationunder the assumption of“come-a

2、nd-go”migration pattern,becomes an old-fashioned theory for policy-making.Byempirically confirming the advent of the Lewis turning point?Cnamely,a new stage of labor migration and more generally ofeconomic development,the paper reveals the policyimplications of the Lewis turning point and proposes t

3、he policyreforms needed for a complete urbanization,including hukousystem reform and equalization of public services.Key Words:urbanization,Todaro dogma,hukou reformI.IntroductionIt is universally acknowledged by economists thatagriculture s share in aggregate output and the workforce tendto decline

4、 as an economy grows.However,economists onlyagree on the existence and inevitability of this phenomenon asa result of general economic growth;debates still arise onissues such as how production and employment aretransformed during the economic development process,whatcharacterizes each stage of thei

5、r transformations and whatchanges are indicative in the transformations.In China,there islittle agreement on the way these transformations take placeeither from a theoretical or an empirical perspective,for thefollowing reasons:First,the explanations and predictions of developmenteconomics vary all

6、the time.For example,while Lewis(1954,1958)considered rural-to-urban migration an integral part ofthe development of a dual economy in developing countries,hein fact assumed that this process was a one-way movement,whereas Todaro(1969)and Harris and Todaro(1970)viewed itas a circular movement follow

7、ing a repetitive“come-and-go”pattern.Second,there have been dissimilarities with respect to thepattern of these transformations among countries and acrosstime,which have made it difficult to determine any stylizedfacts about the two types of transformations.While countriessuch as Japan and South Kor

8、ea accomplished theirmodernization through massive rural-to-urban migrationdecades ago,many developing countriesespecially those inLatin America and East Asiahave been trapped by“urbandiseases”such as extreme poverty and slums in urban areas.Third,the changes which have taken place in China havebeen

9、 too fast for scholars and practitioners to keep pace with.Conventional wisdomsuch as the notion of a longstandingand everlasting excessive labor force in rural areaspreventsobservers from understanding the potential for changingsituations in labor demand and supply,which is particularlyrelevant in

10、Chinas case.The reality and dynamics of Chinas rural labor shift,and ofits turning point in particular,can be observed through thetheoretical framework of Lewisian development economics.Equally important is to apply the theory of demographictransition to China to understand the changes in thedemogra

11、phic structure that have occurred in the past decade.Due to the implementation of strict population control policiesand social and economic developments in China in the pastthree decades,in combination with reform and opening up,rapid economic growth has been underpinned by a rapiddemographic transi

12、tion from high to low fertility,and aconsequent surge in the supply of labor.Proxied by a decliningdependence ratio in econometric analysis,this has accountedfor 26.8 per cent of per capita gross domestic product(GDP)growth during the period of 1982?C2000(Cai and Wang 2005).In recent years,however,t

13、he main source of growth ofthe urban working-age population has been in-migration of therural labor force,and it is predicted that by about 2015,theout-migrating working-age population in rural areas will not beable to meet the demand for the working-age persons in urbanareas.That is,the total worki

14、ng-age population of the countryas a whole will stop growing by this time and begin to shrinkafterwards.The dependence ratio of the population will thenbegin increasing dramatically and the conventionally recognizeddemographic dividend is expected to vanish.This structuralchange in Chinas population

15、 has been reflected in the recentphenomena of rising wages and a shortage of unskilled migrantworkers.Setting the Lewis turning point as a milestone ofdevelopment,a theoretical and empirical recognition of theend of an unlimited labor supply in China can help to identifythe potential areas in which

16、efforts can be made to sustaineconomic growth and harmonize the society in the near future.Migrant workers undoubtedly are at the center of thetheoretical cognition and policy focus.In a sense,changes inthe status of migrant workers will determine the future visionof economic growth and social stabi

17、lity in China.In the 20 yearsleading up to 2030,the consequences of Chinas demographictransition will be further revealed,as the working-agepopulation stops growing in 2015 and the total populationreaches its peak in 2030.For a country such as China,which hasrealized its rapid economic growth by ful

18、ly utilizing its abundantand cheap labor force,the challenges brought about by thedemographic transition have to be tackled so the country canexploit the potential of the its demographic dividend in theshort and medium run and transform its growth pattern in thelong run.This chapter is organized as

19、follows:Section II explains theimplications of the Lewis turning point for the labor supply,andhence,economic growth.Investigating the trends ofrural-to-urban migration and more general labor marketchanges shows that agriculture no longer serves as a pool ofsurplus labor;rather,rural workers migrati

20、on to,andsettlement in,urban areas has become irreversible andinevitable.Section III discusses the outdated policy implicationsof the Todaro paradox in the circumstances of the Lewis turningpoint.This suggests that there is no reason to expect acome-and-go pattern of rural labor migration and that a

21、nappropriate policy choice would be to push forward withurbanization by transforming migrant workers into urbanresidents.Section IV shows the urgency and feasibility ofincluding migrant workers in the urban social security systemfrom the viewpoint of government policy orientation.Section Vconcludes

22、with some policy suggestions.II.The irreversibility of rural?Curban migrationThere has been much disagreement about whether(orwhen)China has reached(or will reach)its Lewis turning point(Cai 2008a,2008b).This is not all that surprising consideringthat,according to Lewis(1972)and other authors(for ex

23、ample,Ranis and Fei 1961),there are,in fact,two turning points as aconsequence of development in a dual economy.The periodwhen the growth of labor demand outstrips that of laborsupplyand hence the wage rate of unskilled workers begins toriseis the first Lewis turning point.At this point,theagricultu

24、ral wage is not yet determined by the marginalproductivity of labor,so a productivity differential between theagricultural and modern sectors still exists.Subsequently,thepoint at which wages in the agricultural and modern sectors aredetermined by their respective marginal productivities of laborand

25、 are equal to each other is the second Lewis turning point,which is also referred to as the commercial point.When aneconomy reaches the latter point,it is no longer a dualeconomy.This section intends to discuss the first of these twoturning points.The Lewis turning point is not,and should not be,abl

26、ack-and-white watershed that distinguishes between twostages of development;rather,it is a transitional periodbridging themor it can be viewed as the starting point of anew historical trend in the course of economic development(Minami 1968).In this regard,while 2004 was a significant yearwhich marke

27、d the turning point,the longer period around it isthe focus of this study.In what follows,we examine thedifferent characteristics of the labor market before and afterthe turning point.During the stage long before the Lewis turning point,dueto the fact that there was a large pool of surplus labor ina

28、griculture and the marginal productivity of labor in that sectorwas very low,the shift of workers from agricultural tonon-agricultural sectors did not impact agriculturalproductionthat is,labor migration at this stage did not causea significant change in the production mode of agriculture.Onthe othe

29、r hand,because non-agricultural sectors during thisstage absorbed the transferred labor force only marginally andsporadically,and since urban authorities frequently dispelledmigrant workers when urban labor markets came underpressure(Cai et al.2001),the agricultural sector still served as apool of s

30、urplus labor.With the arrival of the Lewis turning point,however,circumstances have shown some fundamentalchanges,which we explain as follows:First,the methods of agricultural production have changedin response to the massive and unremitting outflow of workers.Such outflow,given its large scale and

31、steady growth,hasaccelerated agricultural mechanization and modernization andhas pushed a transformation of agricultural technologicalchange from being of the labor-use type to the labor-savingtype.Examining the changes in agricultural mechanizationclearly shows this trend.During the first three dec

32、ades ofeconomic reform,the total power of agricultural machinery hasbeen strengthened,and even with the enlarged base,thegrowth has shown no sign of easing in recent years.What iseven more notable is the changed composition ofdifferent-sized agricultural tractors and tractor-towingmachinery.In the p

33、eriod 1978?C98,when there was a surplusof labor in agriculture,the average annual growth in thecapacity of large and medium-sized tractors was 2 per cent,while that of small-sized tractors was 11.3 per cent.In theperiod 1998?C2008,as the mass labor force shifted fromagricultural to non-agricultural

34、sectors,stronger demandemerged for labor-saving technological advances;the capacityof large and medium-sized tractors increased by 12.2 per centannually and that of small-sized tractors decreased by 5.2 percent.Changes in the growth rates of different sizes oftractor-towing machinery showed a simila

35、r trend,with theaverage annual growth rate of large and medium-sizedtractor-towing machinery increasing from zero per cent in theperiod 1978?C98 to 13.7 per cent in 1998?C2008,whereas theaverage annual growth rate of small tractor-towing machinerydeclined from 12.1 per cent to 6.9 per cent in the sa

36、me period.As a result of falling labor inputs and rising physicalinputs in production,Chinas agricultural capital?Claborratiowhich is denoted by the ratio of physical inputs to laborinputshas risen rapidly since 2004(see Figure 1).According tothe theory of induced technological changes(Hayami andRut

37、tan 1980),this labor-saving tendency during the rapidprocess of agricultural mechanization is the natural result of theultimate abatement of the surplus labor force in agriculture.Itis hardly surprising that the total factor productivity(TFP)of theagricultural sector has also witnessed a rapid rise

38、during thesame periodincreasing by 38 per cent between 1995 and2008,with a sharp rise after 2004(Zhao 2010).Second,urban demand for migrant workers has becomeincreasingly rigid.As the result of a demographic transition,during which the process of the urban age structure changesfaster than the rural

39、age structure,economic growth in urbansectors depends heavily on labor supply through migration.Andyet,as shown in Table 1,while the total number of migrantworkers from rural areas staying in urban areas for six monthsor longer continued to grow from 78.5 million in 2000 to 145million in 2009,the gr

40、owth rate decreased over time.In themeantime,the employment of urban locals continued toincrease,and its growth rate remained constant.In 2009,nearlyone-third of urban employees were rural migrants and theywere dominant in some sectors such as construction.At thesame time,migrant workers tend to res

41、ide and work in citiestemporarily(Zhang et al.2009).In any event,urban sectors canno longer afford a retreat of such a large proportion of thelabor force.According to a survey conducted by the National Bureau ofStatistics(NBS)in early 2009,at the end of 2008,rural workersworking in non-agricultural

42、sectors for more than six monthstotaled 225 million,of which 140 million were migrant workersacross townships,accounting for 62.3 per cent of totalfarmers-turned-workers,and 85 million,or 37.7 per cent,worked in non-agricultural sectors within home townships.Among migrant workers,112 million still h

43、ad family members inhome villages,accounting for 79.6 per cent of all migrants,while 28.6 million migrated from home villages with their entirefamilies,accounting for 20.4 per cent(Sheng 2009).The above-described two trends have altered thecharacteristics of labor migration after the Lewis turning p

44、oint.In the period before the turning point,the cyclical changes ofdemand of the urban and non-agricultural sectors for laboroften bring about a reverse rise and fall of the labor forceengaged in agriculture.The amount of agricultural employmentis not determined by the sectors need per se but statis

45、tically isa residual term,and thus,agriculture still serves as a pool ofsurplus labor.After the turning point,however,fluctuations inthe labor demand of urban and non-agricultural sectors nolonger cause reverse changes in agricultural employment,because the urban and non-agricultural sectors gain th

46、ecapacity to accommodate short-term labor market fluctuations.As a result,agriculture no longer provides a pool of surpluslabor.As shown in Figure 2,the correlation between thegrowth rates of non-agricultural employment and of agriculturalemployment differs statistically before and after theturning-

47、point years.In the period before the mid-1990s,growthrates of non-agricultural and agricultural employment showeddrastically fluctuating and positive growth rates,because thelabor force continued to grow.While the rural surplus laborforce faced the pressure of transferring and the constraints ofnon-

48、agricultural employment opportunities,the twoemployment growth rates showed no stable correlation.Afterthe mid-1990s,while growth rates of non-agricultural andagricultural employment became more stable,they alsobecame significantly and negatively correlated.During theperiod 1998?C2008,the correlatio

49、n coefficient between thegrowth rate of non-agricultural employment and the growthrate of one year lagged agricultural employment was?C0.748,with declining agricultural employment in most years.The mostsignificant change happened in 2004,when the high growthrate of non-agricultural employment and th

50、e negative growthrate of agricultural employment were highly correlated.Inconclusion,while we consider the Lewis turning point to be atransitional period,the year 2004 is still indicative of thatperiod beginning.III.The end of the Todaro dogmaMichael Todaro is widely known for his profound researcho