The fifth chapter analyzes the transfer of agricultural labor and the short-term fluctuations in China’s macroeconomy. In light of the empirical observation of the relationship between China’s macroeconomic cycle and the transformation of its labor market, this chapter proposes the concept of Okun’s law in a broad sense, which introduces the factor of the transfer of agricultural labor, and explains why Okun’s law is not applicable to China by virtue of the empirical data of China. The application form of Okun’s law in a broad sense is associated with the stage of economic development. Okun’s model, which only includes the variable of unemployment rate, is applicable to the developed countries that have completed their transfer of labor, and Okun’s relationship applicable to more economies in transition is supposed to include the variable of the transfer of agricultural labor. China’s unique institutional environment leads to a lack of a significant link between the rate of urban unemployment and the macro-cyclical change. This chapter also uses the transnational panel data to preliminarily test the generalized Okun’s law.
The sixth chapter summarizes the main research conclusions, presents the policy suggestions, and points out the shortcomings of this study and the future direction of in-depth study. The research conclusions and policy suggestions involved the following aspects. First, China’s rising return on capital and sustained rapid economic growth in recent years, on the one hand, get benefits from the effect of technology spillover in the process of investment and production, and on the other hand, are supported by the transfer of agricultural labor. Therefore, it is still necessary to actively implement the policies favorable for transfer of agricultural labor, give full play to the combined effect of the transfer of labor and technology spillover in the improvement of return on capital, and maintain rapid economic growth. At the same time, we should formulate and implement the policies favorable for technological innovation, raise the level of the effect of technology spillover, and make preparations for meeting the strong condition of return on capital in the future. Second, reducing the urban–rural gap in social medical security is an effective measure to improve the level of consumption and reduce the rate of saving. Improving the level of social medical security enjoyed by rural residents through the establishment of a unified social medical security system can boost the consumption of farmers, especially migrant workers, and decrease the rate of household saving, thus helping to reduce the national rate of saving. Third, in addition to the changes in the indicators of the unemployment rate, more attention should be paid to the cyclical changes in the transfer of agricultural labor in the event of formulation of any employment policy. In China’s period of transition, the transfer of labor force constitutes a basic variable connecting the macroeconomic cycle and the fluctuation of the labor market, which shields urban employment from macroeconomic volatility, coupled with the household registration and labor employment system and policies. The strong convertibility of migrant workers between non-agricultural employment and agricultural employment absorbs the impact of macroeconomic fluctuations on the labor market to a great extent, and reduces the sensitivity of the indicators of the unemployment rate to macroeconomic fluctuations. Fourth, China now is still witnessing the huge transferable agricultural labor force, and the potential “transformation dividend” will continue to exert an enormous growth effect for a long term. So, it is optimistic that China can successfully get out of the medium income trap in the future, and the key is to develop a reasonable incentive policy to promote the transfer of agricultural labor and the construction of new urbanization.
About the Author
Mr. Liu Xiaoguang is currently an Associate Professor of National Academy of Development and Strategy, and the Director of China Centre for Government Debt Research in Renmin University of China (RUC). He received a PhD of Economics from Peking University, and was a Visiting Scholar at New York University and University of Chicago. He served as a Part-time Economist at the International Monetary Fund, as well as a Consultant for the Asian Development Bank. Liu’s study focusses on Macro Finance, International Economics and the Labor Market, on which he has published more than 20 academic papers and 4 monographs. He has been consistently engaged in compiling the Keynote Presentation of China Macroeconomic Forum, a quarterly forum hosted by RUC since 2006. Based on his outstanding work, Liu has been awarded Liu Shibai Economics Prize, Outstanding Scientific Research Award of Renmin University of China, China’s Think Tank Academic Achievement Award and National Excellent Doctoral Dissertation of Economics.
About the Translator
Zhang Zhen holds a Ph.D. in philosophy. Her main research interest lies in systems philosophy and social philosophy. She has published papers in several Chinese core journals such as Studies in Dialectics of Natural, and has translated into Chinese and published Dee Hock’s book One from Many: VISA and the Rise of Chaordic Organization.
Acknowledgments
Since the time when I was a graduate student, I have been paying close attention to and studying the transfer of agricultural labor and economic development in China. This book, as a further refinement and improvement of my doctoral dissertation research, can be said to have absorbed the essence of my research findings during my studies at Peking University. After in-depth consideration and polishing during my teaching at Renmin University of China, the book was finally published.
For the compilation of this book, I would first like to extend my sincere gratitude to many teachers and friends during my studies at the National School of Development, Peking University, such as Song Guoqing, Lin Yifu, Yao Yang, Zhang Fan, Fan Gang, Huang Yiping, Alfred Schipke, Alberto Pozzolo, Xu Jianguo, Zhang Bin, Zeng Gang, Lu Ming, Zhang Yuan, Chen Binkai, Lin Wei-ji, Chen Jianqi, Li Yuan-fang, Li Xin, Li Lixing, Yan Ping, Wang Min, Zhao Bo, Luo Zhi, Xie Peichu, Gouqin, Ma Guangrong, Jia Xu, Wang Jian, Zhang Jieping, Zhang Xun, Zhao Yue Shen Guangjun, Zhou Guangsu, Wang Yaqi, Li Shuangshuang, Jiang Zhixiao, Zhou Junan, Eu Xingxing, Yang Yewei and Qiu Muyuan.
Besides, I would like to thank the many colleagues during my teaching experience at the National Academy of Development and Strategy, RUC, such as Hu Naiwu, Yang Ruilong, Liu Fengliang, Mao Zhenhua, Yang Guangbin, Guojie, Radar, Yanyan, Nie Huihua, Wang Jinbin, Zheng Xinye, Chen Yanbin, Zheng Chaoyu, Wang Lili, Wu Cong, Zhang Jie, Luo Laijun, Taoran, Li Yong, Yu Chunhai, Yinheng, Ding Shouhai, Fan Zhiyong, Yu Ze, Sun Wenkai, Wang Xiaosong, Liu Ruiming, Feng Junxin, Yu Yihua, Xia Xiao Hua, Liu Xiaolu, Zhao Yong, Chen Zhanming, Songlu, Liu Kai and Lin Xuelin.
I would also like to thank the National Academy of Development and Strategy for funding, all my colleagues for their strong support and Wang Cheng, editor of the China Social Sciences Press, and his colleagues, for their meticulous editing and proofreading.
Last but not least, I would like to express my special thanks to my supervisor, professor Lu Feng, who guided me to complete my doctoral dissertation and embark on the right academic path with his rigorous scholarship and generous manner; professor Liu Yuanchun, who encouraged me to deepen my research and compile it into a book, and brought me to the ideal path of serving my country through scientific research with his lofty patriotism of governing and benefiting the people. Besides, special thanks are given to the members of my family for their quiet support, as they always give me strength and allow me to march forward regardless of the hardships.
Liu Xiaoguang
Research Building