The Effect of Inter-regional Migration on Regional Economy Disparity in China

(1990-2005)

 Lianqing Peng

South China Normal University

Outline

1. Introduction1. Introduction

2. Survey of Studies2. Survey of Studies

3. The Characteristics of Labor Migration in China3. The Characteristics of Labor Migration in China

4. The Empirical Study 4. The Empirical Study

5. Conclusions 5. Conclusions

1.Introduction

Since the implementation of policy of reform and China’s “opening up” to the outside world, there has been massive migration from Chinese inland countryside to coastal cities. This has deeply changed Chinese economic development and social life, and has influenced regional economic disparity.

This study looks at the effect of massive inter-regional migration on the economic gap across provinces. It asks if this migration is narrowing or widening regional economy disparity.

2. Survey of Studies

The New-Classical Economic theory: (narrowing) the inter-regional migration →the regional economy convergence

（ Braun, 1993; Barro and Sala-i-Martin, 1995 ） The New Economic Geography theory: (could do both)

the inter-regional migration →Widening of the gap →Narrowing of the gap

（ Krugman & Venables,1996; Baldwin, Forslid, Martin,2003 ） Many Chinese Scholars’ empirical studies:

The inter-regional migration has widened the gap in across China’s regions. Why couldn’t the inter-regional migration lead to the regional economic convergence? May suggest that this is because of China’s hukou polices.

Shi Li (2003), ( Du, et al.,2005),Qin (2006), Cai(2007) Duan(2008), Cheng(2012)

3. The Characteristics of Labor Migration in China 3.1 Five Periods and the scale of Chinese migration

Five Periods of Chinese migration

Year Stage Description

Period 1 1979-1983 Beginning movement(allowed but controlled )

Period 2 1984-1992 Allowing movement/loosening(most of migrants were peasants)

Period 3 1993-1997 Accelerating movement/loosening(most of migrants were peasants)

Period 4 1998-2005 Accelerating movement/loosening(more and more urban labors migrate)

Period 5 2006-present Accelerating movement/loosening(more movement trends)

3.1 Five Periods and the scale of Chinese migration

The 1st stage, 1979 － 1983 Implementation of Chinese reform and opening policies

which encourages the beginning of a labor market. Some farmers migrate to cities to make a living.

3.1 Five Periods and the scale of Chinese migration

The 2nd stage, 1984 － 1992 More and more farmers move to work in local factories in

Eastern China(Jianshu, Zhejiang, Guangdong) because the rise of non-state-owned companies.

3.1 Five Periods and the scale of Chinese migration

The 3rd stage, 1993 － 1997 The market economy had rapidly developed in eastern region. Mass migrants moved to cities in

Eastern region from Chinese inland（ central and western ） countryside.

3.1 Five Periods and the scale of Chinese migration

The 3rd stage, 1993 － 1997 The labor supply exceeded the demand in many Eastern cities

contributed to many social problems.

Unpaid wages, the boss can’t pay the workers on time

3.1 Five Periods and the scale of Chinese migration

The 4th stage, 1998 － 2005 Many state-owned companies began to reform and layoff

workers who also become unemployed in Chinese inland （ central and western) cities.

Many labors moved to cities in Eastern region from Chinese inland （ central and western ） cities.

3.1 Five Periods and the scale of Chinese migration

The 5th stage, 2006 － present The geographic trends of migrating started to change as more

migrants moved to Chinese inland cities Migrants start to settle down in the cities and urbanization

accelerates. Eastern cities began to experience labor shortages.

3.1 Five Periods and the scale of Chinese migration

The Scale of Migration ten thousands

Year Other estimation Census and sample survey

Inter-towns Inter-counties Inter-provinces Inter-towns Inter-provinces

1983 200 - - - -

1987 - - - 3053 632

1989 3000 - 700 - -

1990 - - - 3413 1183

1993 6200 4300 2050 - -

1994 8000 5200 2400 - -

1995 - - - 5400 2500

1996 7223 4487 2364 - -

1997 3890 2602 1488 - -

1998 4936 3218 1872 - -

1999 5204 3622 2125 - -

2000 - - - 14439 4242

2005 - - - 14735 4779

2010 22143 8588

3.2 Flows of migration

inflow areasoutflow areas

Sum From eastern From central From westernTo eastern 　 　 　 　

1987 52.0% 49.7% 61.7% 44.2% 1990 54.6% 56.0% 59.0% 49.3% 1995 63.1 % 63.5% 71.8% 56.5% 2000 75.0 % 64.4% 84.3% 68.3% 2005 84.6 % 78.3% 89.8% 80.1%

To central 　 　 　 　1987 24.6% 31.3% 21.8% 21.2% 1990 24.0% 28.4% 23.5% 20.4% 1995 18.8% 20.5% 12.7% 13.4% 2000 9.8% 19.7% 7.1% 7.9% 2005 5.5% 10.9% 4.4% 4.4%

To western 　 　 　1987 23.3% 18.9% 16.6% 34.6% 1990 21.4% 15.6% 17.5% 30.3% 1995 18.1% 16.1% 15.5% 30.2% 2000 15.3% 15.9% 8.6% 23.9% 2005 9.9% 10.8% 5.8% 15.5%

52.0%

84.6%

3.2 Flows of migration

Migration occurred mainly from the central and western regions to the eastern region which is more developed.

Main outflow areas

Main inflow areas

3.3 The main characteristics of labor migration

(1) The synchronization : inter-regional migration and inter-sector migration.

Year

Outflow areas Inflow areasFrom

countryside to

citycountryside city countryside city

1982-1987 68.0% 32.0% 23.6% 76.4% 74.4%

1985-1990 62.5% 37.5% 17.3% 82.7% 78.5%

1990-1995 59.8% 40.3% 28.6% 71.4% 60.2%

1995-2000 58.7% 41.3% 11.9% 88.2% 69.0%

2000-2005 61.3% 38.7% 15.6% 84.4% 80.3%

3.3 The main characteristics of labor migration

(1) The synchronization : inter-regional migration and inter-sector migration.

The structure of employment of inter-regions labors %

industry eastern central western sum

The primary industry 5.68 31.94 22.07 8.27

The secondary industry 74.85 33.27 32.26 69.56

Manufacturing 66.41 17.16 16.58 60.19

Construction 7.33 9.57 12.37 7.81

Other 1.12 6.54 3.3 1.57

The tertiary industry 19.47 34.79 45.68 22.17

3.3 The main characteristics of labor migration

(2) "circular migrants“ Many migrants had dual identity: Farmer working in the city Job in the city and family in the countryside Regular movement

The structure of population in some eastern cities(2005) thousand

City T-POP Have hukou No hukouRatio

(no hukou)

Beijing 15380 11841 3539 23.01%

Shanghai 17780 13603 4177 23.49%

Guangzhou 9942 7029 2913 29.30%

Shenzhen 7009 1223 5786 82.55%

Dongguan 6446 1544 4901 76.04%

Fushai 5338 3284 2054 38.48%

3.3 The main characteristics of labor migration

(3) Selective migration hasn’t emerged in the eastern region.

The average years of education of migrants in eastern region was less than that in central and western regions.

The average years of education of migrants leaving eastern region was more than that in central and western regions.

The average years of education of immigrants year

Flow out Flow in From eastern From central From western sum

To eastern - 9.01 8.76 8.91

To central 10.23 - 9.38 9.88

To western 9.77 9.01 - 9.32

sum 10.02 9.01 8.82

4. The Empirical Study 4.1 The Evolution of Regional Economy Disparity in China

The gap of regional economy had narrowed from 1978 to 1990, but widened from 1991 to 2005.

The Coefficient of Variance (COV) of per capita GDP each province in China

0

0. 2

0. 4

0. 6

0. 8

1

1. 2

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

4.1 The Evolution of Regional Economy Disparity in China

The gap of regional economy had narrowed from 1978 to 1990, but widened from 1991 to 2005.

the contrast of per capita GDP in three regions

* The per capita GDP in eastern region was assumed “100”.

Year 1990 1995 2000 2005

Eastern 100 100 100 100

Central 60.47 51.98 49.22 47.56

Western 52.25 43.17 38.56 39.82

4.1 The Evolution of Regional Economy Disparity in China

The gap of regional economy had narrowed from 1978 to 1990, but widened from 1991 to 2005.

the contrast of per capita GDP in three regions

* The per capita GDP in eastern region was assumed “100”.

Year 1990 1995 2000 2005

Eastern 100 100 100 100

Central 60.47 51.98 49.22 47.56

Western 52.25 43.17 38.56 39.82

Had the inter-regional migration caused the Regional Economy

Disparity?(which verifies the hypothesis of New Economics)

Geography).It is difficult to solve the problem by the Conventional

method of econometrics.

To answer the question, Taylor and

Williamson （ 1997 ） Proposed a new method. They ask

another: what would have been the measured convergence

had there been no (net) migration?

4.2 The Method of Study

Laborer is producer and consumer. on the one hand, more migrants means more input

factors, which is beneficial for the output; on the other hand, more migrants may influence the per

capita GDP.

So, the impact of migration to per capita GDP in inflow area and outflow area depends on the comparation of the migration elasticity of output and the migration elasticity of population.

Taylor and Williamson Proposed a new method to estimate the two elasticity.

The method of mathematical derivation in the appendix

4.3 Analysis of the results

The results: Table 1990 Table 2000 Table 2005

The result shows that the inter-regional migration narrowed the gap of regional economy. In other words, the inter-regional migration caused regional economy convergence.

4.4 An explanation: the income of migrants transferred

Most of migrants’ income was earned in the city but transferred to their families in central and western regions.

The amount of income transferred from immigration in eastern region

Year

Per worker Income

transferred（ $ ）

Labors(flew in eastern region), million

Income transferred(from eastern), $ billion

From central From western To central To western

1990 205.28 0.96 1.24 0.29 0.382000 546.80 14.48 7.93 11.87 6.512005 618.49 18.36 10.70 17.03 9.93

5. Conclusions

1.The China’s inter-regional migration led to more efficient allocation of labors across regions, which was helpful in national economic growth.

2.The eastern region was a net in-migration region, and labor migration had promoted economic development in the eastern region; At the same time, the wages (or income) of migrants had been raised.

3.The central and western regions were the net emigration region, where many rural families of emigration benefits through income transfers from the eastern region. As a result, the growth rate of per-capita consumption and per-capita income had been greatly increasing, which also promoted regional development.

4. The China’s inter-regional migration has caused convergence not divergence of regional economies.

Thank you

4.2 The Method of Study

Assume a aggregate production function for output,

Y=F(L, K, R) where Y is total output, L is labor input, K is capital and

R is land.

we assume the producer price P is equal to one. taking K and R as fixed.

)1(...),(

...),(

dLLFdY

LFY

L

4.2 The Method of Study

Under long-run full employment conditions, competitive wages are equal to labor’s marginal product, where w is wage.

Solving (1) and (2), produces an equation (3), .

)1(...),(

...),(

dLLFdY

LFY

L

)2(...),(LFw L

)3(dLwdY

4.2 The Method of Study

Divide two sides of equation (3) By Y , produces an new equation(4).

In equation(5) , θ is the ratio of wages in output, approximately equal to the migration elasticity of output.

)3(dLwdY

)5()(LLY

LY assume we

)4(

Y

wL

Y

wLL

dL

Y

dYL

dL

Y

wLdL

Y

w

Y

dY

＊＊＊

＊＊ ，＝

4.2 The Method of Study

we assume:

M is cumulative net migration rate, POP*= M;

a share αM of its migrant stream is active in the labor force,

while its total population has an active share αP.

Moreover, assume that migrants have an effective-worker (or worker-quality) ratio of μ with respect to the total labor force.

the labor content of the population is:

L =αP POP and the labor content of the migrant flow is:

dL = μαM M POP

4.2 The Method of Study

the labor content of the population is:

L =αP POP and the labor content of the migrant flow is:

dL = μαM M POP

Migrant streams of population measured by M can be

converted into labor supply shocks L* .

Defining γ = (the migrant-to-population ratio of labor-force participation rates)

)6()(LP

M

P

M MML

dL

＊

4.2 The Method of Study

We can now derive the simulation equations used to calculate the impact of migration on per capita GDP:

If we estimate M, θ and γ , we can calculate the impact of migration on per capita GDP. Then we can estimate per capita GDP without migration.

So we can appraise the change of the gap of per capita GDP between outflow area and inflow area, which approximatively measures the Effect of Inter-regional Migration to Regional Economy Disparity.

)6()(LP

M

P

M MML

dL

＊

)5()(LLYY

wL

Y

wL ＊＊＊

)7()1()/( MMLPOPYPOPY ＊＊＊＊

Data and estimation of parameters

This paper calculated M, θ by analyzing the data of 1990,2000 Population Census and 2005 Population Sample Survey.

This paper estimated γ with the ratio of Compensation of Employees in GDP each province. Data were from The Chinese Statistical Yearbook.

return