Cheng Mingwang: School of Economics and Management, Professor & PhD Supervisor 

China's economy has grown rapidly and created a remarkable "growth miracle” since the reform and opening up, for which the optimal allocation of production factors is one of the important reasons. As the most active factor of production, the optimal allocation of labor force, especially the rural labor force between industries and between urban and rural areas, can't be ignored. According to China's statistical yearbook (2016), the proportion of labor force in the agricultural sector dropped from 70.5% in 1978 to 28.3% in 2015, with an annual average decline rate of 0.7% , indicating rural labor’s rapid transfer to urban areas and non-agricultural sectors and the formation of a group of hundreds of million migrant workers under the background of China's unique household registration system. Then, what is the contribution of such a massive urban and rural migration to China's economic growth? In other words, how much does the transfer of rural labor contribute to China's economic growth? 

Spatial and temporal characteristics of inter-provincial migration of rural labor force in China (1978-2015)

With the deepening of reform and opening-up，China's non-agricultural economy grew rapidly from 1978 to 2015, resulting a upward trend of the rural labor force transfer (figure 1). Under the background of unbalanced development of great power economy and regional economy, the inter-provincial transfer of rural labor shows significant features including the general eastern agglomeration towards “Hu Line", the "core-edge" structure in some areas, and the in-out imbalance in inter-provincial transfer (figure 2, figure 3).

Figure 1  Temporal evolution trend of rural labor transfer from 1978 to 2015

Figure 2  In-out proportion distribution of interprovincial rural labor transfer

Figure 3  Interprovincial transfer network of rural labor force 

The contribution of interprovincial transfer of rural labor to China’s economic growth

The contribution rate of labor to the total social output reached 31.46% from 1978 to 2015, indicating that labor is an essential productive factor to promote China's economic growth. Fully utilizing comparative advantage in labor resource is one of China's important strategies to achieve rapid economic growth. And, the contribution rate of labor to output of agricultural sector and non-agricultural sector was 31.47% and 30.73% respectively, indicating that agriculture is more dependent on labor force. Under the circumstance that the scale operation is not entirely accomplished, the small-scale peasant economy based on family operation is still a major feature of agriculture in China, which is more dependent on labor force. 

Rural labor transfer contributed 11.64% to non-agricultural output and 10.21% to social gross output respectively. The labor force transfer increased its own productivity by 4.4887 times and contributed 7.93% to the economic growth, among which the contribution rate was mainly from the eastern region of the Hu Line (11.74%). The transfer labor force contributed the most to the economic growth of immigrant areas  (16.11%), followed by the balanced areas, and least to the emigrant areas. This shows that the transfer of rural labor force has made an important contribution to China's economic growth since the reform and opening-up. On one hand, the marketization process promotes the optimized allocation of urban and rural labor resources, and the improvement of rural labor productivity in non-agricultural industries promotes China's economic growth. On the other hand, the transferred rural labor mainly engaged in "dirty and heavy" work in non-agricultural sectors, and got "different pay for the same work" compared with the local workers, that made historic and unique contributions to China's economic growth since the reform and opening-up. 

The mechanism of the contribution of rural labor transfer to China's economic growth is the optimal allocation of labor resources between industries and between urban and rural areas. On one hand, output balance resulting from industrial efficiency difference contributes to economic growth, namely growth effect. On the other hand, the quality and skills of the labor force are improved due to the aggregation effect and the learning effect learning through doing, that leads to the upgrade of labor productivity and thus contributes to economic growth, namely efficiency effect.