China's Mobility Barriers and Employment Allocations

44 Pages Posted: 29 Nov 2016 Last revised: 2 Jan 2018

See all articles by Rachel Ngai

Rachel Ngai

London School of Economics & Political Science (LSE) - Department of Economics; Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Christopher A. Pissarides

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Hong Kong University of Science & Technology (HKUST)

Jin Wang

affiliation not provided to SSRN

Date Written: November 2016

Abstract

China’s hukou system imposes two main barriers to population movements. Agricultural workers get land to cultivate but run the risk of losing it if they migrate. Social transfers (education, health, etc.) are conditional on holding a local hukou. We show that the land policy is a more important barrier on industrialization. This distortion can be corrected by giving property rights to farmers. Social transfers dampen mainly urbanization. We calculate that the two policies together lead to overemployment in agriculture of 6.7 points, under-employment in the urban sector of 6.3 points and have practically no impact on the rural non-agricultural sector.

Keywords: China hukou, employment allocations, land policy, mobility barriers, social subsidies

JEL Classification: J61, O18, R23

Suggested Citation

Ngai, Liwa Rachel and Pissarides, Christopher and Wang, Jin, China's Mobility Barriers and Employment Allocations (November 2016). CEPR Discussion Paper No. DP11657. Available at SSRN: https://ssrn.com/abstract=2877262

Liwa Rachel Ngai (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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+44 207 955 7017 (Phone)
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Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

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Kowloon
Hong Kong

Christopher Pissarides

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7513 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Jin Wang

affiliation not provided to SSRN

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