Accounting for Labor Misallocation in China with Provincial Data 1980-2010

Peiwen Bai and Wenli Cheng

No 52-14, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper develops a simple accounting framework to measure the extent of labor misallocation in Chinese provinces over the period 1980-2010. It also investigates possible factors that influence labor misallocation. The main findings are: (1) the extent of labor misallocation fell substantially in the first half of 1980s. During the 25 years since 1985, labor allocation has improved somewhat but there was no monotonic trend of improvement over time. (2) In 2010, the Eastern region had the lowest level of labor misallocation, followed by the Central region, and the Western region. (3). Wage differentials cross primary, secondary and tertiary sectors accounted for a substantial portion of measured overall labor misallocation; the secondary sector’s wage deviations from VMPL also had the effect of raising labor misallocation, whereas the impacts of the primary and tertiary sectors’ wage deviation from VMPL differed over time. (4) A higher level of urbanization, the development of the tertiary sector and the growth of the non-state sector appear to have contributed to a reduction in labor misallocation.

Keywords: accounting of resource misallocation; labor misallocation in China (search for similar items in EconPapers)
JEL-codes: C43 J01 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2014-11
New Economics Papers: this item is included in nep-cna and nep-tra
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