| This paper makes a study on the motivation and mechanism of agricultural labor forcetransferring to non-agricultural sector and how to promote this labor migration. Firstly, weanalyze the stage characteristics and the background of China’s agricultural labor transferhistory. Since the the reform and opening-up, China is under the step of both dual economictransformation and transformation from planned economy to market economy, which arehindering the labor flow across departments. As a result, the ‘pure’ classical Labor transfermodel in development economics cannot explain China’s current situation well; labor forceflow must be explained with the consideration of mobility cost factor caused by institutionalbarriers, and factor of public and non-public organization evolution.There are4macro factors that influence on labor reallocation since the Reformation. Thewage gap between agricultural sector and non-agricultural sector caused by productivitydifference is the most important motivation of the labor reallocation, the income elasticity ofdemand caused by non-homothetic preferential consumer secondly. However, these twomechanisms need on the good market economy environment to play a role.1. From supply aspect, comparing to agricultural sector, non-agricultural sector hasrelatively higher labor productivity which effects the changes in production technology, thusthe cost of non-agricultural sector gradually reduce; reflecting the price of non-agriculturalproduct is relatively cheap. Under the assumption that the overall income of residents isconstant, and by the substitution effect, consumption in non-agricultural product rises, andthe production of non-agricultural product will be escalated by the market equilibrium ofsupply and demand, resulting in more and more labor flow to non-agriculture section, andchange the employment structure.2. From the demand aspect, the income elasticity of demand of non-homotheticpreferential consumer is not constant, along with the increasing in income, optimum productconsumption structure changes. Due to agricultural product is necessary product whichincome elasticity of demand is less than1, and income elasticity of demand ofnon-agricultural product is normally higher than1implying that once income increase by1%,increasing in consumption of non-agricultural product is higher than agricultural product’s. Under the effect of demand-supply equilibrium, agricultural production scale enlarges slowly,then stagnates, result in flowing out of labor, and also decrease in employment share.Non-agricultural production scale enlarges quite fast, labor shifts from agricultural sector tonon-agricultural sector, and increases the employment share.3. Due to some system barriers, registration system for example, causing the labormisallocation in urban and rural, and misallocation in various economic sections. This kind ofmisallocation distorts the price of labor, wage, and other factor prices severely; in one hand,labor cannot move to the city freely, causing the great labor surplus in agricultural sector,which also results in labor factor and capital factor price parity decreasing. Labor wage,compare to the initial stage, falls down, thus, more and more agricultural enterprises use laborto substitute capital; reduce the usage of machine in the production, so that it can take morelabor force in. In another hand, labor force in urban area is ‘relatively’ short. Price parity oflabor factor and capital factor rises, labor wage is relatively high. Non-agricultural enterprisesthen reduce employing labor. Along with the ‘relatively’ high wage in non-agricultural sector,residents’ income rises. Consumers’ non-homothetic mechanism expands non-agriculturalsector, which facilitates labor in agricultural sector to flow to non-agricultural sector.4. Core characteristic of China’s market economic reformation is reducing in publicownership, rising in private ownership. State-owned enterprise and township enterprisereformation rectifies the labor misallocation between public sector and private sector, causingthe great rising in labor productivity in those two sectors. According to the optimizedallocation in labor factor, labor productivity of non-agricultural sector in countryside isgreatly elevated; stimulate the labor reallocation in agricultural and non-agricultural sectors.Based on the above theoretical analysis, this research forms a model of3sections toanalyze the driving factors of China’s cross-section labor reallocation as since its Reformation.Not only merging the previous researches of cross-section productivity differences,characteristics of consumers’ non-homothetic preferences, factors causing institutionalbarriers on Chinese labor flow, the research also takes scale alteration of public section asanother significant driving factor. Using the actual statistics from1978-2011to demonstrate,the overall result of this model is quite completed. Furthermore, analyzing counterfactual experiment, qualitatively, it is found out thatcross-sector productivity difference is the most important factor influencing on laborreallocation, and the role of household registration system causing labor flow barriers and roleof diminishing in scope of public section are similar.From the quantitative aspect, if the increment rate of cross-sector labor productivity isconstant during the period of1978-2011, the employment rate of agricultural section would beat the standard model of67.39%, which can roughly assume that productivity differencesaccount for33%of labor reallocation. If the cost of cross-sector labor flow is constant, theemployment rate of agricultural section would be at the standard model of78.26%, this factoraccounts for22%. Public output (general tax rate) proportion is constant, the employment rateof agricultural section would be at the standard model of80.43%, it should account for19%.By this amount, distortion level of government intervention against free market, which causesintegrated influences on labor reallocation, is effected more by the cost of cross-sector laborflow and public output proportion, rather than cross-sector labor productivity differences. |
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