Human capital, migration and rural entrepreneurship in China

Human capital, migration and rural entrepreneurship in China Purpose – Many countries have experienced, or are experiencing, urbanization. One such example is China. Even though the large‐scale rural‐urban migration seems chaotic on the surface, there are certain underlying forces driving individual decisions. The purpose of this paper is to provide some understanding of the relationship between human capital, migration, and occupational choices. Design/methodology/approach – The paper starts with an overlapping generations model. Human capital plays various roles across different occupations – it does not affect the income of farmers, it affects income of workers linearly, and it has increasing returns in rural non‐farm business. The paper then derives income profiles for individuals with heterogeneous human capital, and finds the human capital thresholds of occupations. The paper calibrates the model to China, and simulates the model to answer two questions: how does an improving human capital distribution affect rural wages, quantities of migrants and return migrants? How does a fast‐growing urban wage rate affect rural wages, quantities of migrants and return migrants? Findings – First, depending on the initial human capital level, policies aiming to enhance human capital may have different impacts on migration. If the initial human capital level is low, these policies will yield more permanent migrants; on the contrary, if the initial human capital is at a relatively high level, then a shrinking permanent migrant class with a growing entrepreneur class can be expected. This results in an inverted U‐shaped relation between the initial human capital level and the size of the permanent migrant class. Second, even though the non‐farm business of return migrants helps raise rural wages, the income inequality between rural and urban areas is not eliminated and migration is persistent. Third, borrowing constraints limit the size of rural non‐farm businesses and slow down the development of rural industry. The fourth and final point is that, migration costs discourage labor mobility and reduce the quantities of both permanent migrants and entrepreneurs. Originality/value – This is an original paper on this subject. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

Human capital, migration and rural entrepreneurship in China

Indian Growth and Development Review, Volume 4 (2): 23 – Sep 27, 2011

Loading next page...
 
/lp/emerald-publishing/human-capital-migration-and-rural-entrepreneurship-in-china-dd7MyGWThj
Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8254
DOI
10.1108/17538251111172023
Publisher site
See Article on Publisher Site

Abstract

Purpose – Many countries have experienced, or are experiencing, urbanization. One such example is China. Even though the large‐scale rural‐urban migration seems chaotic on the surface, there are certain underlying forces driving individual decisions. The purpose of this paper is to provide some understanding of the relationship between human capital, migration, and occupational choices. Design/methodology/approach – The paper starts with an overlapping generations model. Human capital plays various roles across different occupations – it does not affect the income of farmers, it affects income of workers linearly, and it has increasing returns in rural non‐farm business. The paper then derives income profiles for individuals with heterogeneous human capital, and finds the human capital thresholds of occupations. The paper calibrates the model to China, and simulates the model to answer two questions: how does an improving human capital distribution affect rural wages, quantities of migrants and return migrants? How does a fast‐growing urban wage rate affect rural wages, quantities of migrants and return migrants? Findings – First, depending on the initial human capital level, policies aiming to enhance human capital may have different impacts on migration. If the initial human capital level is low, these policies will yield more permanent migrants; on the contrary, if the initial human capital is at a relatively high level, then a shrinking permanent migrant class with a growing entrepreneur class can be expected. This results in an inverted U‐shaped relation between the initial human capital level and the size of the permanent migrant class. Second, even though the non‐farm business of return migrants helps raise rural wages, the income inequality between rural and urban areas is not eliminated and migration is persistent. Third, borrowing constraints limit the size of rural non‐farm businesses and slow down the development of rural industry. The fourth and final point is that, migration costs discourage labor mobility and reduce the quantities of both permanent migrants and entrepreneurs. Originality/value – This is an original paper on this subject.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Sep 27, 2011

Keywords: China; Rural areas; Urban areas; Internal migration; Human capital; Entrepreneurship; Borrowing constraints

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off