Research On Lewis Turning Point In China

Since the economic reform, the Chinese economy has experienced rapid growth. As a typical country of dual economy, China’s rapid growth and surplus labor have an inseparable relationship. During this period, the labor mainly comes from two aspects. One is that a large number of surplus laborers transfer from rural to urban sector, the other is that large people of working age come into the labor market. But slowing growth of working-age people, labor shortage in some areas and increased labor cost are hindering the Chinese high-speed economic growth. Some scholars argue that these are the phenomenon of the Lewis turning point. They think that the Chinese economy has transfer form unlimited labor supply to labor shortage and it’s hard for China to sustain such high-speed growth. China may be falling into "middle income trap". However, there are also some scholars questioning this statement. Whether labor has fallen into shortage stage in China and whether the supply-demand change of labor market means that the Lewis turning point has come? Whether the Chinese economy will be slowing, even stopping? So it is very important to correctly judge the Lewis turning point which will determine the China’s future development model.This thesis is based on dual economy theory and uses Lewis model, Ranis—Fei model and Minami model to analyze the Chinese Lewis turning point from five aspects, such as labor wage analysis, comparative analysis between the wage and the marginal product of traditional rural sector, the relationship between the wage and the marginal product of traditional rural sector, labor supply elasticity of traditional rural sector to modern sector, and the economic rent share of traditional rural sector.Based on empirical data analysis, we don’t think that the Chinese Lewis turning point has coming. China still has rich labor in short-term. The labor shortage just is kind of illusion and the Chinese economy will not be restricted by labor supply in the near future.But the phenomenon of labor shortage reflects that the rural laborers have low wages, poor working conditions, and the right of rural workers is ignored by firms. So government should complete the institution construction, promote the surplus labor transfer from rural sectors to modern sectors and push economy construction transformation form dual economy to one economy.In the long-run, people’s construction change will decrease labor supply, and China will come into aging society. In the long-run, labor transformation from traditional sectors to modern sectors will be over. So the Lewis turning point will be coming finally. The government should actively promote the transition of economic growth model form mainly relying on labor or capital input to relying on technology progress and institutional adjusting. We suggest that the government should promote full employment of labor, strengthen the cultivation of human capital and make the best of potential demographic dividend. Besides, the retirement pension system must be set up fully so as to provide support for the old people.This thesis is divided into ten chapters.Chapter one is the introduction. In this chapter, I introduce the research background, research significance, research contents, research thoughts, research methods, contributions and limitations of this thesis.Chapter two is the basic concepts and literature review. I firstly explain the meaning of dual economy, the Lewis turning point, and survival wage and then review and evaluate the related literature of Lewis turning point. In the end, the misunderstanding about Lewis turning point is pointed out.Chapter three shows the theoretical models. The mainly thoughts of Lewis model、Ranis—Fei model and Minami model are introduced and explained.In Chapter four, I estimate the rural production function which is the base from Chapter six to Chapter nine.In Chapter five, I analyze the wage level of labor from four angles including total volume of labor wage, real net income construction of rural family and the income gap between the different industries to judge whether the Lewis turning point has come. I don’t find the evidence that the Chinese Lewis turning point has come. In Chapter six, I judge that China is being the second stage of Lewis form the real wage and marginal product of labor. Besides, I find that the slowly going up trend of rural real wage should not be thought as the symbol of Lewis turning point based on Lewis model.Chapter seven studies the relationship between the real wage of rural sector and marginal productivity to judge whether the Lewis turning point has come. I find that the correlation is low, which means that the Chinese Lewis turning point has not come.Chapter eight analyzes the labor supply elasticity of traditional rural sector to modern sector as the judging criterion of Lewis turning point. The results show that the Chinese Lewis turning point doesn’t have come.In Chapter nine, I judge the Lewis turning point from the angle of the economic rent share of traditional rural sector. From the participation rate of rural market, I find that the participation rate of rural market is lower than the economic rent share of agriculture. From the labor construction, I find that the employment rate in agriculture is larger than the wage share of rural labor. So I argue that the Lewis turning point doesn’t have come.Chapter ten is the conclusion of this thesis and the policy suggestion. It summarizes the main findings of this thesis and gives the potential policy suggestions.The main contributes or innovation points are as follows:This thesis estimates the real wage level of rural area in China based on the Ranis—Fei model. I revise the model considering the institutional factors in China and analyze the potential reasons that lead to going up slowly in real wage level of rural area. The real wage level is basic measure of judging Lewis turning point.The thesis has contributions in variable choosing and methods. For example, we use material expense and labor input in food production per mu to estimate rural production function. The data is come from China statistical yearbook which is more correct than using fixed asset of agriculture to estimate rural production function. In the analysis of the relationship between real wage of agriculture sector and labor marginal productivity, I use time series regression which can avoid some problems that Minami proposed.The thesis uses Lewis model, Ranis—Fei model and Minami model to analyze the Chinese Lewis turning point and find some judgment standards which makes up the shortcoming of some domestic scholars judging the Lewis turning point just form experience which lack of theory basis.