Labor allocation in transition: Evidence from Chinese rural households

Type Journal Article - China Economic Review
Title Labor allocation in transition: Evidence from Chinese rural households
Volume 18
Issue 3
Publication (Day/Month/Year) 2007
Page numbers 287-308
Empirical models are developed in this paper to quantitatively analyze households' participation in
decisions on hiring labor and supplying labor off the farm, hired labor demand and off-farm labor supply of
rural Chinese households. Econometric estimates use micro-level data from Zhejiang province over the
period 1995–2002. The main results suggest that the decisions to hire labor and participate off the farm are
made jointly and are positively correlated. A household's labor demand decreases with increasing wages for
hired labor, whereas the effect of the wages of off-farm workers on a household's labor supply differs
significantly depending on the household's kind of labor market participation. The results also indicate that
the accumulation of productive assets, the development of livestock production and agricultural prices have
increasing effects on labor demand but reducing effects on a household's off-farm labor supply. Land
market integration enhances participation significantly but has no significant impact on time allocation.
Finally, the results suggest non-separability between hired labor demand and household characteristics,
indicating the rural labor market in Zhejiang province is still functioning imperfectly.

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