WTO Accession, Rural Labour Migration and Urban Unemployment in China

Abstract

This paper evaluates the rural-urban migration and urban unemployment effects of China's WTO accession based on the China-US bilateral agreement on market accession. The evaluation is conducted by a 53-sector recursive dynamic computable general equilibrium (CGE) model of China benchmarked to a most recent version of the Chinese Social Accounting Matrix (SAM). The simulation results show that there is a great need for co-ordination between China's rural-urban migration policy, labour market reform and the implementation of trade liberalisation measures after China's WTO entry. The net benefit from WTO membership will be maximised if China adopts a policy gradually to relax its rural-urban migration control in conjunction with its labour market reform. Doing so not only prevents a dramatic worsening of the urban unemployment problem, but also permits enough labour market flexibility to create more employment opportunities for rural unskilled labour shifted out of the farming sector.

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