How Important was Labor Reallocation for China's Growth? A Skeptical Assessment

Ye, L and Robertson, P 2018, 'How Important was Labor Reallocation for China's Growth? A Skeptical Assessment', Review of Income and Wealth, vol. 64, no. 4, pp. 828-852.


Document type: Journal Article
Collection: Journal Articles

Title How Important was Labor Reallocation for China's Growth? A Skeptical Assessment
Author(s) Ye, L
Robertson, P
Year 2018
Journal name Review of Income and Wealth
Volume number 64
Issue number 4
Start page 828
End page 852
Total pages 25
Publisher Wiley-Blackwell Publishing Ltd.
Abstract Numerous studies report the growth effects from labor reallocation in China to be in the order of 1-2 percentage points per year, which would appear to be a significant fraction of China's per capita income growth. We show that the total factor productivity gains are an order of magnitude smaller, at only 0.25 percentage points per year. There are two reasons for this difference. First, the majority of studies have used a decomposition method that effectively assumes linear production functions. This results in values that are much larger than the more appropriate Denison-Kuznets method. Second, we also allow for sectoral differences in human capital. We conclude that the gains from labor reallocation may have been a far less important source of China's growth than is conventionally thought.
Subject Economic Development and Growth
Keyword(s) China
dual economy
economic growth
productivity
structural change
DOI - identifier 10.1111/roiw.12301
Copyright notice © 2017 International Association for Research in Income and Wealth
ISSN 0034-6586
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