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

100 million workers (ZGTJNJ, 1996). Most of the development, however, has occurred
in the coastal provinces (Rozelle, 1996). In contrast, inland rural areas still rely on
agriculture and do not enjoy the high incomes of their more industrialized coastal
counterparts (Yang and Zhou, 1996).

While growth in rural industry initially provided off-farm employment
opportunities primarily for local residents (Siu, 1989; Wedeman, 1993, Meng, 1990), the
continuing success of rural enterprises has begun to open up local labor and managerial
markets (Chen and Rozelle, 1998). Since the beginning of the reform era, the rural
industrial sector has faced fewer regulations than its urban counterpart. Despite having
reletively more freedom in the 1980s, collective enterprises still favored local workers
(Walder, 1995). The rise of private enterprise in the rural economy (Jin and Qian, 1998)
and competitive pressures (Naughton, 1995) have induced local leaders to offer contracts
with more autonomy for the managers of collective firms, an action that has freed
managers to hire with fewer restrictions (Chen and Rozelle, 1998).

The Rise of Off-Farm Employment

China’s growing rural labor force has had unprecedented success finding income
earning opportunities off the farm in recent years, and this success is partly due to
increasing labor mobility. China’s rural labor force, totaling 403 million workers in
1988, grew to 446 million workers by 1995 (ZGTJNJ). Over this period, the percentage
of workers with non-farm employment also increased, growing from 19 to 33 percent of
the rural labor force (table 1, row 2, columns 1 and 4).

Although all categories of off-farm employment grew between 1988 and 1995,
some expanded faster than others (table 1). The rise of self-employed and rural-to-urban

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