Agriculture Reference
In-Depth Information
Macroeconomic impacts on migration
In a follow-up study to Tyers and Rees (see Chapter 9 and 2002), Chang and
Tyers (see Chapter 10 and 2003) analyse the slow-down in China's income
growth since the East Asian financial crisis. In particular, they examine the
slow-down in rural income growth and the widening rural-urban income
gap and ask to what extent ths s due to: 1) the remanng obstacles to
rural-urban migration (as suggested by Ianchovichina and Martin 2002);
2) the WTO trade reforms (as suggested by Anderson et al. 2002); or 3)
restrctve macroeconomc polces. Usng the GTAP model adaptaton of
Tyers and Rees (see Chapter 9),
2
the researchers test the extent to whch
China's fixed exchange rate and capital controls—and its WTO accession
commitments—have contributed to the relatively poor performance of the
rural sector. The East Asian financial crisis was seen as leading to a large
(largely illegal) outflow of capital. This capital flight and the trade reforms
are hypothessed to have led to a real exchange rate deprecaton. The
pegging of the yuan to the US dollar has therefore necessitated a deflation.
If wages are 'sticky' and fall more slowly than prices, employment declines.
It s hypothessed that the resultng real wage ncrease n the modern
sectors has reduced labour demand and hence 'bottled up' workers n the
rural sector and reduced rural per capta ncomes.
Analysis of the data shows that while restraints on rural-urban migration
have been relaxed to some extent, the migration flow has decreased rather
than ncreased. The smulaton results support the hypothess that the
fixed exchange rate and the capital controls have restricted the flow of
workers from the rural sector. The model shows the rate of mgraton nto
the manufacturng sector fallng by at least one percentage pont a year
and nto the servces sector by at least two percentage ponts a year. In all
sectors there s a stark contrast between employment growth under tght
capital controls and a fixed exchange rate regime on the one hand and an
open capital account and floating currency regime on the other. Indeed,
wth an expansonary macroeconomc polcy and optmstc assumptons
about the productivity effects associated with the WTO accession reforms,
smulated worker relocaton demands from the reforms exceed the average
