Migration, labor market flexibility, and wage determination in China: a review

While rural to urban migration has been a major feature of the development process in most developing countries, China has experienced this trend mainly since the economic reforms in 1978. Prior to the reforms, migration was limited as the household registration (hukou) system restricted mobility. The growth in rural to urban migration has therefore, raised several questions. What are its causes? What are the implications? This paper addresses these issues through a review of the literature and research on migration in China. In particular, the paper focuses on:

• the profile of migrants
• explanations for rural to urban migration
• the links between migration and the evolution of the labor market, especially labor market segregation, labor market flexibility and wage differentials

The hukou system and institutional arrangements for segregating urban and rural populations are reviewed in the paper. The paper also traces the evolution of rural to urban migration policy, and discusses the changes in migration trends and issues of labor market segregation.

The paper notes that in general, studies on migration find that:

• surplus labor in rural areas and the rural-urban gap are the driving forces behind rural to urban migration in China
• age, gender and marital status are important variables in the decision on migration
• the labor market in China is still segregated in different ways, such as between the urban and rural labor market, between migrants and non-migrants and within the migrant population

Although research on migration has led to a greater understanding of these trends, the paper cautions that:

• the quality of existing data sets are not suitable for migration research
• most of the research on migration uses regional data which, given the vast regional differences in China, causes problems of comparability

The paper concludes that further research is required on many issues, especially as they have important implications for policy formulation. These issues include:

• the dynamics between migration and the evolution of the labor market, for instance, the impact of migration on urban unemployment, job creation and wages
• the effects of migration on family structures of the migrants, and on the wellbeing of the children of the migrants
• a comparison between the economic and social behavior of permanent migrants and temporal migrants
• the impact of migration on the source communities
• the impact of restrictions on migration on productivity

This paper was published in the Developing Economies, Volume 43, Number 2 (June 2005), 285-312