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Rural-urban divide in China

This is my 7th week in Beijing and I continue to enjoy the experience.   I have been to three workshops over the past 3 days all of which have dealt with poverty in China, with rural-urban issues and the environment.  The huge strides China has taken in eliminating poverty cannot conceal the huge disparities between urban and rural living standards. The original rigid hukou system – apartheid-like residency rules that define where Chinese must live and work – have been softened but there remain significant barriers to rural-to-town migration. A lot of this literature reminds me of the international migration work I once did – the difference here is only that the labour flows are intra-national.  Indeed the paper by John Whalley and Shunming Zhang,  A numerical simulation analysis of (Hukou) labour mobility restrictions in China,  Journal of Development Economics, 2007 is a replication of a Whalley-Hamilton paper written in 1983 on the international gains from liberalising international labour markets. Both are highly recommended.

Apart from natural migration flows there are local government induced flows as local governments use land sales as a source of revenue.  There are substantive ‘fiscal federalism’ issues in China and the need for a broader rural governmental tax base that is partly subsidised by urban dwellers.

Despite fears of a house price bubble – the real estate in Beijing is amazingly expensive – there is not a lot of support here for a capital gains tax on housing. Nor is there much interest in environmental taxes (congestion, pollution) that again could be largely used to redistribute income from rich to poor.

The main obstacles seem to be interest group politics of the type I would have expected in an economy with very different – polar opposite – characteristics!

I find Barry Naughton’s The Chinese Economy: Transitions and Growth, MIT Press, 2007 the most straightforward way of getting informed on the Chinese economy. It is good on agriculture and the migration issue.  But yes I am learning!

2 comments to Rural-urban divide in China

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  • conrad

    “The main obstacles seem to be interest group politics of the type I would have expected in an economy with very different – polar opposite – characteristics!”

    I think your opinion is surely biased by who is in charge of the media and what you personally hear. My bet is there’s tons of resentment amongst the voiceless, most of whom are not living in Beijing.

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