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Accounting for Labor Misallocation in China with Provincial Data 1980-2010

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  • Peiwen Bai
  • Wenli Cheng

Abstract

This paper develops a simple accounting framework to measure the extent of labor misallocation in Chinese provinces over the period 1980-2010. It also investigates possible factors that influence labor misallocation. The main findings are: (1) the extent of labor misallocation fell substantially in the first half of 1980s. During the 25 years since 1985, labor allocation has improved somewhat but there was no monotonic trend of improvement over time. (2) In 2010, the Eastern region had the lowest level of labor misallocation, followed by the Central region, and the Western region. (3). Wage differentials cross primary, secondary and tertiary sectors accounted for a substantial portion of measured overall labor misallocation; the secondary sector’s wage deviations from VMPL also had the effect of raising labor misallocation, whereas the impacts of the primary and tertiary sectors’ wage deviation from VMPL differed over time. (4) A higher level of urbanization, the development of the tertiary sector and the growth of the non-state sector appear to have contributed to a reduction in labor misallocation.

Suggested Citation

  • Peiwen Bai & Wenli Cheng, 2014. "Accounting for Labor Misallocation in China with Provincial Data 1980-2010," Monash Economics Working Papers 52-14, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2014-52
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2014/5214labormisallocationchinabaicheng.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    accounting of resource misallocation; labor misallocation in China;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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