Agriculture Reference
In-Depth Information
Finally, our simulations rest on the assumption that production and
sklled workers n one sector are perfectly transformable nto correspondng
workers n other sectors. Because some workers have narrowly sector-
specific education and training and because sectoral relocation has high
transaction costs, particularly for rural families, the actual transformability
of producton workers wll reman mperfect (Scular and Zhao 2002). Our
results therefore place upper bounds on the economc performance results
from the WTO accession reforms and, more importantly for our purpose,
upper bounds on worker relocaton demands n the short run.
Conclusions
Our chronicle of changes in economic performance, income distribution
and nternal mgraton n Chna suggests a recent slowng of employment
growth n the modern sector and the 'bottlng up' of labour n rural
activities, widening the income gap between urban and rural workers.
Ths has happened n spte of what our revew suggests s a consderable
relaxation of the worker registration, or
hukou
, system that has constrained
nternal mgraton n the past.
To examine the hypothesis that the slowdown in economic growth,
and the pace of worker relocation in particular, is due at least in part to a
restrictive macroeconomic policy regime, we adapt a comparative static
multi-product, multi-region macroeconomic model. We use the model
to compare the economc effects of a key element of Chna's current
economic reform program, namely its commitments associated with its
accession to the WTO, under a variety of macroeconomic policy regimes.
These range from very restrictive capital controls, combined with a fixed
exchange rate, to a regime with no capital controls (or the equivalent in FDI
flexibility) and a flexible exchange rate. The results suggest these regimes
make a dfference of at least 1 per cent per year n GDP growth and at
least 2 per cent per year n employment growth n the economy's modern
sector. They therefore support our hypothesis, at least to the extent that
the macroeconomc polcy regme has contrbuted to a slowdown n the
pace of expansion and worker relocation. Indeed, with an expansionary
macroeconomc polcy and optmstc assumptons about productvty
