THE RISE OF RURAL-TO-RURAL LABOR MARKETS IN CHINA

We also examine the factors that affect rural wages in villages with and without incoming
workers.

Demand for Incoming Workers

In our empirical work, we are analyzing the aggregated hiring decisions of
collective and private enterprise managers. In the spirit of Chen and Rozelle
(forthcoming) and Park and Pan (1998), managers are assumed to be hiring labor to
maximize their welfare or profits, subject to technological, economic, and policy
constraints. As such, the demand for labor, as postulated in the theory of the firm, is a
function of prices (especially the wage rate), other fixed factors, policy and technology.
Hypotheses

If restrictions are relatively unimportant, and rural firms are mostly free to
maximize profits, the decision to hire commuters and migrants should be determined by
the relative wage rates, and relative efficiency, of local versus incoming labor. Managers
also may choose workers with human capital characteristics that match the firm’s
requirements. For example, enterprises in the light industrial sector demand large
numbers of relatively unskilled, low cost workers and should be expected to host large
numbers of incoming commuters and migrants.

If there are systematic policy barriers, other factors may affect hiring decisions.
One of the most direct channels of enforcing employment rules and regulations is by
direct order, a process that may be much easier when a village’s firms are collective
rather than private. If private owners can hire incoming workers, but managers of
collective firms are still constrained by policy, then there should be a positive correlation
between a dummy variable for villages with at least one private enterprise and the

20

<<   18   19   20   21   22   23   24   >>

More intriguing information