The Effect of Inter-regional Migration on Regional Economy Disparity in China ( ) Lianqing Peng South China Normal University

Outline 1. Introduction 2. Survey of Studies 3. The Characteristics of Labor Migration in China 4. The Empirical Study 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 YearStage Description Period Beginning movement(allowed but controlled ) Period Allowing movement/loosening (most of migrants were peasants) Period Accelerating movement/loosening (most of migrants were peasants) Period Accelerating movement/loosening (more and more urban labors migrate) Period presentAccelerating movement/loosening (more movement trends)

3.1 Five Periods and the scale of Chinese migration  The 1 st 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 2 nd 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 3 rd 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 3 rd 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 4 th 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 5 th 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 estimationCensus and sample survey Inter-townsInter-countiesInter-provincesInter-townsInter-provinces

3.2 Flows of migration inflow areas outflow areas SumFrom easternFrom centralFrom western To eastern %49.7%61.7%44.2% %56.0%59.0%49.3% %63.5%71.8%56.5% %64.4%84.3%68.3% %78.3%89.8%80.1% To central %31.3%21.8%21.2% %28.4%23.5%20.4% %20.5%12.7%13.4% %19.7%7.1%7.9% %10.9%4.4% To western %18.9%16.6%34.6% %15.6%17.5%30.3% %16.1%15.5%30.2% %15.9%8.6%23.9% %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 areasInflow areas From countryside to city countrysidecitycountrysidecity %32.0%23.6%76.4%74.4% %37.5%17.3%82.7%78.5% %40.3%28.6%71.4%60.2% %41.3%11.9%88.2%69.0% %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 % industryeasterncentralwesternsum The primary industry The secondary industry Manufacturing Construction Other The tertiary industry

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 CityT-POPHave hukouNo hukou Ratio (no hukou) Beijing % Shanghai % Guangzhou % Shenzhen % Dongguan % Fushai %

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 easternFrom centralFrom westernsum To eastern To central To western sum

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

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 the contrast of per capita GDP in three regions * The per capita GDP in eastern region was assumed “100”. Year Eastern100 Central Western

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 the contrast of per capita GDP in three regions * The per capita GDP in eastern region was assumed “100”. Year Eastern100 Central Western 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 The method of mathematical derivation in the appendix

4.3 Analysis of the results  The results:  Table 1990 Table 1990  Table 2000 Table 2000  Table 2005 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 centralFrom westernTo centralTo western

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.

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),.

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.

4.2 The Method of Study  we assume: M is cumulative net migration rate, POP*= M ; a share α M of its migrant stream is active in the labor force, while its total population has an active share α P.  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 =α P POP  and the labor content of the migrant flow is: dL = μα M M POP

4.2 The Method of Study  the labor content of the population is: L =α P POP  and the labor content of the migrant flow is: dL = μα M 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)

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.

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 return