Research On Foreign Direct Investment And Redundant Rural Labor Force Under The Dual-economy Structure

For the different periods of macroeconomists, exploring how to achieve full employment or reduce unemployment rate has become a timeless topic. At the present stage, taking into account the actual situation in the dual-economy structure, the transfer of redundant rural labor force employment in the city-rural or across-region areas constitute the main content of the employment growth in China, how to accelerate the transfer of redundant rural labor employment and maintaining stable employment situation are becoming one of the important goals in government regulation. Over the past30years of reform and opening up, depending on the advantage of cheap labor force and the huge development potential of Chinese economic market, China has rapidly become the world’s production base in manufacturing industry through attracting foreign investment, and the continued inflow of foreign capital greatly ease the pressure on the transfer of redundant rural labor force. However, the domestic industrial structure upgrading wave under the "Forced" mechanism effect, together with the changes of organic composition of foreign capital, making the impact on the transfer of redundant rural labor force is no longer a single positive effect, but showing a more complex dynamic characteristics. At the same time, the regions’imbalance inflow of foreign capital and the transfer of redundant rural labor force are more prominent, which has largely affected not only the healthy and coordinated development of regional economic, but also the fair and stabile society. It is imminent to achieve relatively balanced geographical distribution of foreign investment, stabile employment levels and the coordinated development of regional labor markets. This paper uses the1996to2011China’s provincial panel data, and the2003to2010panel data with more than282prefecture-level cities, deeply research the effect of FDI on the transfer of redundant rural labor from the theoretical and empirical perspective.For existing literature lacking of theoretical mechanism analysis and studying down to the level of redundant rural labor force problem, this paper construct a simple theoretical model drawing lessons from the big push theory, to elaborate the theoretical transmission mechanism about the impact of FDI on the transfer of redundant rural labor force in China. Theoretical study found that, the impact of FDI on the transfer of redundant rural labor force mainly through two channels of providing employment opportunities and paying higher wage premium. In terms of the provision of employment opportunities, the two channels behaving as the process of capital and labor elements matching each other from the level of production factors. On the mobile space dimension, the two channels behaving as the movement of labor force chasing capital and achievement employment opportunities. From the level of paying higher wage premium, foreign companies can not only pay the wage premium of redundant rural labor force, but also have stronger technical level and higher wages than most domestic enterprises. Meanwhile, China has obvious power characteristics of transition economies, and huge consumer market can attract large inflows of foreign capital continuously, which can make sure the foreign-funded enterprises have the ability to pay wage premium and provide a prerequisite to realize the big push model. Although at different stages of the inflow of foreign direct investment, it has some different effect on the transfer of redundant rural labor force, but it is no doubt that the flow of foreign direct investment plays an important role on transference employment of redundant rural labor force from rural to urban non-agricultural.On the basis of theoretical research, the paper makes empirical research about FDI on the impact of redundant rural labor force transference considering nonlinear threshold characteristics. Using actual foreign direct investment stock as the threshold variable, the estimation results show that, the impact of FDI on the transfer of redundant rural labor force is significantly present in the double threshold effect of FDI. At different stages of the inflow of foreign direct investment, there are significant differences in the impact on the transference of redundant rural labor force. As the increasing of thresholds, the positive impact of FDI on the effect of the redundant rural labor force transference shows a gradual decreasing trend. Using the real income gap between urban and rural areas as the threshold variable, the estimation results indicate that, the impact of FDI on the transfer of redundant rural labor force exists in a significant income gap between urban and rural dual threshold effect. As the expansion of income gap between urban and rural areas, the positive effect on the redundant rural labor force transference gradually becomes decreased. The statistical analysis results of the provinces’spatial distribution of the different grouping variable shows that, the foreign direct investment and the transfer of redundant rural labor force remain the same geographical spatial distribution, the smallest five provinces of foreign direct investment and redundant rural labor force from the western region, and the biggest seven provinces in11provinces from developed eastern coastal areas. Moreover, the impact of FDI on the transfer of redundant rural labor force exits in obvious nonlinear relationship and the "threshold effect" feature.Because of the connection between different provinces having an important impact on the foreign distribution and the transfer of redundant rural labor force, this paper makes the space gathering empirical test about the impact of FDI on the transference of redundant rural labor force. Empirical results found that, the transfer of redundant rural labor force in different provinces exits in obvious spatial dependence characteristics, there is a positive spatial spillover effect between surrounding provinces, while spatial agglomeration in the transfer of redundant rural labor force has obvious "Matthew Effect" feature. The transfer of redundant rural labor force in eastern and Midwest regions present obvious spatial concentration and spatial spillover effects, but the spatial concentration effect of redundant rural labor force transference in Midwest is stronger than the eastern region. Meanwhile, in order to particularly characterize the changes of important explanatory variables in the neighboring province that affecting the province’s redundant rural labor force transfer, this paper establishes spatial econometric model to make empirical analysis on the spatial agglomeration effect and "Third-Province" effect of FDI on the transference of redundant rural labor force. Exploratory spatial data analysis results find that, the spatial form of foreign direct investment and the transfer of redundant rural labor force step in descending order distribution from the east coast to the inland areas, which forms a gathering center for the eastern coastal areas of the "core-periphery" pattern, space neighbor effect is very obvious. Spatial econometric test results show that, as cumulative cycle mechanism on industrial agglomeration of FDI and local market effects, the transference of redundant rural labor force has high concentration and coagulation features in high-high and low-low concentration region.At the same time, considering the position of the government in the transition economies is highlighting, and fiscal system reform plays an important role of the transference of redundant rural labor force at this stage, this paper join in the fiscal decentralization variables in researching the impact of FDI on the transference of redundant rural labor force. Empirical study find that, foreign direct investment has continued significant positive impact on the transference of redundant rural labor force, fiscal decentralization has obvious "inverted U-shaped" curve characteristics on the effect of redundant rural labor force. The impact of foreign direct investment on the transfer of redundant rural labor force in central and western regions of is significantly larger than the eastern region, but the promoting role of financial income and expenditure decentralization on the transference of redundant rural labor force is significantly less than the eastern region. Further, this paper constructs a "multi-valued" discrete "appropriate fiscal decentralization index" by setting a specific threshold, and statistics the following three fiscal decentralization aspects, such as lack of decentralization, appropriate decentralization and over decentralization. Lacking of decentralization still occupying vast majority indicate that, the reform tax system is still incomplete, which has become the main obstacle for government to increase financial self-sufficiency ability. Moreover, Chinese municipal governments lack the capacity to provide the necessary public services for redundant rural labor force because the mismatch between intergovernmental financial authorities, which will form the negative impact for the transference of redundant rural labor force. Finally, this paper put forward the corresponding policy recommendations based on the main conclusions on the above.