Migration As Marketization: What Can We Learn from China’s 2000 Census Data?

    1. Introduction
    As per capita income grows, the decline in share of agriculture in economy leads to sectoral change. As the result of this economic law, labor force shifts from rural to urban areas motivated by income disparity in the two areas. Observing the wide existence of dual structure in developing countries, economists have documented institutional issues such as institutional determination of wage in agricultural sector (Lewis 1954), the division of the formal and informal sectors in urban areas, and institutional determination of wage rate in urban formal sector (Harris et al. 1970; Fields 1974). However, previous theories on migration mainly consider migration as a phenomenon of structural changes in the process of economic development, but cannot provide a theoretical framework for analyzing migration from an institutional perspective, because their founders did not have opportunities to observe the internal migration in a transitional economy.
    The massive population flow from rural to urban areas in post-reform period of China is the result of both structural changes caused by the economic growth and institutional changes. In the pre-reform period, the planning system was born and served as a tool implementing heavy industry-oriented strategy. A capital-intensive heavy industry in a capital-scarce economy could not be built through market forces; instead, it had to be a planned mechanism that allocated resources among sectors in accordance with the government priority. Therefore, capital, labor and other factors of production were not necessary and were not allowed to freely move following the market signals. As this strategy was adopted in 1950s, capital and labor were strictly restricted by a host of institutions and could not transfer among sectors, regions and ownerships. Any mobility of factors of production was deemed a disobedience of the planning. Those institutions include household registration (or hukou) system that divided rural and urban population into separate groups, urban employment policy and welfare policy that excluded rural residents from its entitlement, urban rationing system for food and necessities, and urban biased social security system.
    Of all those institutional arrangements separating population and labor between rural and urban areas, hukou system was the most important one. In the early years of People’s Republic of China, migration was not restricted. In the period 1949 to 1957, 70-80 percent of the increment of population in Chinese cities and towns can be attributed to rural-to-urban migration, like typically happened in other developing countries (IPS 1988). Later, in order to guarantee the adequacy of laborers producing agricultural products in rural areas and to limit the number of people enjoying low priced food in urban areas, a set of institutions were needed to restrict population mobility between rural and urban sectors. Issuing of Regulations on Household registration of People’s Republic of China in 1958 marked the beginning of the complete establishment of hukou system and has been put into operation of restricting both migrations between rural and urban areas and across regions……
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    (in The China Review, Vol. 3, No. 2 (Fall), pages 73-93.)