The Effect of Inter-regional Migration on Regional Economy Disparity in China (1990-2005)

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The Effect of Inter-regional Migration on
Regional Economy Disparity in China(1990-2005) 
Lianqing Peng South China Normal University
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Outline
1. Introduction
2. Survey of Studies
3. The Characteristics of Labor Migration in China
4. The Empirical Study
5. Conclusions
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1.Introduction

• Since the implementation of policy of reform and
  Chinas 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.

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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 Chinas regions. Why couldnt the
  inter-regional migration lead to the regional
  economic convergence? May suggest that this is
  because of Chinas hukou polices.
• Shi Li (2003), ( Du, et al.,2005),Qin (2006),
  Cai(2007) Duan(2008), Cheng(2012)

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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)
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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.

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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.

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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.

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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 cant pay the workers on
time
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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.

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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.

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3.1 Five Periods and the scale of Chinese
migration

• The Scale of Migration ten
  thousands

Year Other estimation Other estimation Other estimation Census and sample survey Census and sample survey
Year 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
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3.2 Flows of migration
inflow areas outflow areas outflow areas outflow areas outflow areas
inflow areas Sum From eastern From central From western
To 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
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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
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3.3 The main characteristics of labor migration

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

Year Outflow areas Outflow areas Inflow areas Inflow areas From countryside to city
Year countryside city countryside city From countryside to 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


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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
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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 hukou Ratio (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
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3.3 The main characteristics of labor migration

• (3) Selective migration hasnt 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
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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

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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
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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.

Had the inter-regional migration caused the
Regional Economy Disparity?(which verifies the
hypothesis of New Economics) Geography).
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
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?
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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

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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.

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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 Labors(flew in eastern region), million Income transferred(from eastern), billion Income transferred(from eastern), billion
Year Per worker Income transferred () From central From western To central To western
1990 205.28 0.96 1.24 0.29 0.38
2000 546.80 14.48 7.93 11.87 6.51
2005 618.49 18.36 10.70 17.03 9.93
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5. Conclusions

• 1.The Chinas 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 Chinas inter-regional migration has
  caused convergence not divergence of regional
  economies.

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• Thank you

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4.2 The Method of Study

• Assume a aggregate production function for
  output,
• YF(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.

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4.2 The Method of Study

• Under long-run full employment conditions,
  competitive wages are equal to labors marginal
  product, where w is wage.
• Solving (1) and (2), produces an equation (3), .

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4.2 The Method of Study

• Divide two sides of equation (3) By Y , produces
  an new equation(4).
• In equation(5) , ? is the ratio of wages in
  output, approximately equal to the migration
  elasticity of output.

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4.2 The Method of Study

• we assume
• M is cumulative net migration rate, POP M
• a share aM of its migrant stream is active in
  the labor force, while its total population has
  an active share aP.
• 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 aP POP
• and the labor content of the migrant flow is
• dL µaM M POP

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4.2 The Method of Study

• the labor content of the population is
• L aP POP
• and the labor content of the migrant flow is
• dL µaM M POP
• Migrant streams of population measured by M can
  be converted into labor supply shocks L .
• Defining ? (the migrant-to-population ratio
  of labor-force participation rates)

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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, ? and ? , 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.

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Data and estimation of parameters

• This paper calculated M, ? by analyzing the data
  of 1990,2000 Population Census and 2005
  Population Sample Survey.
• This paper estimated ? with the ratio of
  Compensation of Employees in GDP each province.
  Data were from The Chinese Statistical Yearbook.
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