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Labor Market Distortions, Rural-Urban Inequality and the Opening of China's Economy

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  • Zhai, Fan
  • Hertel, Thomas

Abstract

This paper evaluates the impact of some key labor market reforms on rural-urban inequality and income distribution, using a household-disaggregated, recursive dynamic computable general equilibrium (CGE) model of China. We also explore how these factor market reforms interact with product market reforms currently underway as part of China’s WTO accession process. The simulation results show that the reforms in rural land rental market and Hukou system, as well as increasing off-farm labor mobility would reduce the urban-rural income ratio dramatically. Furthermore, the combination of WTO accession and factor market reforms improves both efficiency and equality significantly.

Suggested Citation

  • Zhai, Fan & Hertel, Thomas, 2004. "Labor Market Distortions, Rural-Urban Inequality and the Opening of China's Economy," Conference papers 331184, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331184
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    References listed on IDEAS

    as
    1. Deepak Bhattasali & Shantong Li & Will Martin, 2004. "China and the WTO : Accession, Policy Reform, and Poverty Reduction Strategies," World Bank Publications - Books, The World Bank Group, number 14920.
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    More about this item

    Keywords

    Labor and Human Capital; Community/Rural/Urban Development;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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