Fiscal Decentralization, Rural Industrialization, and Undocumented Labor Mobility in Rural China (1982-87)

70 Pages Posted: 11 May 2015

Abstract

This paper explores the relationship between fiscal decentralization, which gave greater rural industrialization and fiscal authority to local governments, and the emergence of rural-rural undocumented inter-provincial labor migration during China's initial reform period. A Heckman model is employed to correct for the zero observation problems and to consistently estimate the labor mobility with a modified gravity equation. Given the institutional barriers, the fiscal decentralization has two contending effects on labor market integration: Local economic development promotes labor mobility, but local public goods crowding restrains the inflow of labor at the destination. The crowding effect is stronger at lower levels of government.

Keywords: fiscal decentralization, local economic development, local public goods, rural labor mobility

JEL Classification: H30, J61, J68, D72

Suggested Citation

Chen, Yiu Por, Fiscal Decentralization, Rural Industrialization, and Undocumented Labor Mobility in Rural China (1982-87). IZA Discussion Paper No. 9024, Available at SSRN: https://ssrn.com/abstract=2604387 or http://dx.doi.org/10.2139/ssrn.2604387

Yiu Por Chen (Contact Author)

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

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