A quantitative analysis of China's structural transformation

Abstract

Between 1978 and 2003 the Chinese economy experienced a remarkable 5.7 percent annual growth of GDP per labor. At the same time, there has been a noticeable transformation of the economy: the share of workers in agriculture decreased from over 70 percent to less than 50 percent. We distinguish three sectors: private agriculture and nonagriculture and public nonagriculture. A growth accounting exercise reveals that the main source of growth was TFP in the private nonagricultural sector. The reallocation of labor from agriculture to nonagriculture accounted for 1.9 percent out of the 5.7 percent growth in output per labor. The reallocation of labor from the public to the private sector also accounted for a significant part of growth in the 1996-2003 period. We calibrate a general equilibrium model where the driving forces are public investment and employment, as well as sectorial TFP derived from our growth accounting exercise. The model tracks the historical employment share of agriculture and the labor productivities of all three sectors quite well. are deeply appreciated. a quantitative, general equilibrium growth model to try to capture China's recent growth and structural transformation. We use this model to project the likely path of China's future growth, and the role the transfer of labor from agriculture to nonagriculture will play in this growth.Our model has three sectors, the agricultural sector, the nonagricultural private sector, and the nonagricultural public (government) sector. The agricultural and the nonagricultural private sectors are profit maximizing; but we leave the objective of the Chinese public sector unspecified; the public sector simply extracts labor and capital from the rest of the economy. China is nominally still a socialist economy. At the beginning of our period, 1978, the public sector produced nearly all of nonagricultural output. Even in 1990, public sector output was over 90 percent of nonagricultural output. Thus, for China, it is important to model the public sector explicitly.Technological progress is exogenous in all three sectors, but is highest in the nonagricultural private sector. We show in the analysis of our model that the expansion of the nonagricultural public sector-which occurred in China from the late-1970s to the mid-1990s-will draw labor out of agriculture. We also show that the more rapid technological progress in the private nonagriculture sector will draw labor out of agriculture. A rise in private nonagricultural productivity will tend to lower the relative price of nonagricultural goods, raising the demand for labor in private nonagriculture, at the expense of labor in agriculture. Using plausible parameter values, we simulate our model and find that the model tracks the historical employment share of agriculture, and the labor productivities of all three sector remarkably well. Thus, the two main driving forces for China's structural transformation-or the decline in the agricultural share of employment-are the expansion of the nonagricultural public sec...

Growth and Structural Transformation

“…What role does structural transformation play in these countries' growth? Dekle and Vandenbroucke (2012) have studied structural transformation in China during 1978-2003. They have found that differential sectoral productivity growth and the reduction of the relative size of the Chinese government caused most of the structural transformation, but that mobility frictions (like the hukou system) slowed the movement out of agriculture.…”

“…Dekle and Vandenbroucke (2012) that these restrictions slowed the Chinese movement out of agriculture.…”

A systems science perspective and transdisciplinary models for food and nutrition security

“…The structure and dynamics of agribusiness (food production, distribution, and marketing) are strongly shaped by the trajectory of a country's economic growth. Development is generally characterized by a falling share of agriculture in economic output, rising share of urban population compared with rural population, and rising economic activity in industry (72,73), along with restructuring of the modes of agricultural production and the labor force (74)(75)(76). The role played by agribusiness in food and nutrition security is therefore changing across different stages of economic development.…”

Structural Change and Income Distribution: Accounting for Regional Inequality in the People's Republic of China and its Changes During 195222012

“…For the case of the People's Republic of China (PRC), see Wan (2008aWan ( , 2008b and Wang, Wan, and Yang (2014) on income distribution and Dekle and Vandenbroucke (2011) on structural transformation. The classic works of Kuznets (1955) and Lewis (1955) focus on the relationship between growth (not structural change per se) and inequality, which is largely applicable to developing economies only.…”