Employment Diversification and Off-Farm Earnings in Rural China: A Case Study of Liaoning Province

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ABSTRACT

This article examines the determinants of, and remuneration to, a variety of offfarm activities (OFAs) in northeast rural China during the late 1990s. The question is addressed by means of a dedicated fieldwork survey of 450 rural households in a clustering of nine villages in Xinmin County located in Liaoning Province. The econometric methodology consists of deploying a multinomial logit model to track the distribution of OFA employment opportunities and, for earnings, a Mincerian type function for wage labour and out-migrants, and a translog production function for the self-employed. A novel procedure that the data enabled us to perform was to investigate the seasonal dimension, particularly what happens at agricultural peak times. Our results reveal that market - rather than overtly political - forces are assuming increasing significance; that returns to education are very positive; that birthplace remains a potent determinant of work destination and earning capacity; and, finally, that being male and single motivates rural inhabitants to seek OFAs to a much greater extent than all other household members. These findings have implications for those responsible for framing policy.

I. INTRODUCTION

The Chinese economic reforms that commenced in the late 1970s have transformed the agrarian institutional arrangements into something resembling a proto-capitalist structure. The main milestones have been the abolition of collectivised agriculture and the introduction of the household contract system, and the relaxation of the constraining household registration system (hukou). In principle, rural family households and individuals are now free to make their own decisions about choice of livelihood. Although subsistence farming, together with its peasant mode of life, continues to dominate the countryside, over the last quarter of a century a whole array of off-farm activities (OFAs) have emerged. These offer the prospect of employment away from grain cultivation and of enhanced earnings potential. The context of these important developments is clear. Market forces are penetrating ever-larger swathes of the rural economy, and are increasingly impinging upon many aspects of work (Kedliker, 1992; Ho, 1994; Lin, 1995; Zweig, 1997; Hughes, 2001; Guldin, 2001; Whiting, 2001; Murphy, 2002; Unger, 2002). The PRC's recent entry to the WTO will undoubtedly accelerate this trend (OECD, 2001 and 2002; Sharpe, 2001).

In the formative years of modern development economics, Sir Arthur Lewis (1954) argued that during the "normal" transition process, developing countries were characterised by having "unlimited" supplies of labour in the traditional sector. Although China was a comparatively late starter on this road of structural change, the country has rapidly begun to conform to this pattern. Given that the population expanded enormously during the early Socialist era, and with the institutional barriers to inter-sectoral migration being progressively reduced, there are currently in the order of half a billion rural workers (State Statistical Bureau, 2000; The Economist, 2002). Although it is obviously difficult to be precise about the scale and incidence of underemployment in view of enormous regional variation and the issue of seasonality, the continuous flow of people into rural off-farm activities, and the large-scale spatial migration to urban areas provides evidence, albeit indirect, of the existence of surplus labor in the agricultural sector (Zhu, 1991; Lu, 1993: Zweig, 1997; Rawski and Mead, 1998; Cook, 1999; Kalirajan and Wu, 1999; UNDP and the World Bank, 2000: Zhang el al., 2001; Hughes, 2001; de Brauw et al., 2002; Rozelle et al., 2002; Johnson, 2000).

Internal migration to towns and cities is one solution to "surplus" person-power (Johnson, 2000; Rozelle et al., 1999a; Rozelle et al., 1999b). However, there are several practical obstacles standing in the way, not least the fact that many of the urban sprawls are already close to, or even beyond, the limit of their sustainability and effective carrying-capacity. …