Agriculture Reference
In-Depth Information
and the associated private investment slowdown during the Asian financial
crisis (Yang and Tyers 2001). Since then, however, numerous trade reforms
have been implemented, all of which have tended to encourage Chinese
consumption to shift toward foreign goods, so reducing home relative to pre
tarff foregn goods prces and hence further deprecatng the real exchange
rate (Tyers and Rees Chapter 9). By definition, a real depreciation must
be accompanied either by a nominal depreciation, a domestic deflation,
or a combnaton of both. The
de facto
peg to the US dollar has therefore
necessitated China's deflation. When prices are falling there is downward
pressure on wages. Even if wages fall only slightly more slowly than prices,
however, other things being equal, employment growth in the wage sectors
of the economy can be expected to declne.
1
In the Chnese case ths appears
as hgh real wage growth n the modern sector but reduced labour demand
growth there and hence a 'bottlng up' of workers n the rural sector and
reduced rural ncome per capta.
The relevance of ths story to Chna's comparatvely poor recent per
capta rural ncome growth performance s examned here usng short and
long-run comparatve statc analyss. The shocks consdered are Chna's WTO
accesson commtments and the model used s that descrbed n Tyers and
Rees (Chapter 9). Ths model s a development of the model ntroduced by
Yang and Tyers (2000). It is a multi-sector, multi-country comparative static
macro model, the microeconomic components of which have their origins
n GTAP.
2
All countres have open captal accounts and forward-lookng
nvestor behavour s represented n the short run va expectatons formed
from long-run simulations. The focus here, however, is on labour relocation
and the short run consequences of trade reform shocks for the uptake of
labour n the manufacturng and servces sectors.
3
We examne the pace of
such labour relocaton hstorcally and compare ths wth smulated changes
n labour demand followng the WTO accesson.
We observe a reversal n the rate of relocaton of workers from
agriculture to manufacturing after 1998 and a glut of workers in the rural
sector (Dolven 2003). Our simulations suggest that the retarding effect of
the commonly cited system of internal migration restrictions, known as
the
hukou
or household registration system (HRS), has been enhanced by
China's broader macroeconomic policy regime. Indeed, the exchange rate
