Shifting Toward the West? An Analysis of Sectoral Employment Growth Across China’s Counties, 2000–2010

ABSTRACT

Since the late 1990s, the focus of China’s regional policies has been redirected to coordinate regional development, and a series of policy shifts have been launched to promote the development of hinterland and interregional equity. This study analyzes how the spatial and sectoral patterns of employment growth have changed between 2000 and 2010 by estimating aggregate and sectoral employment growth equations using county-level employment data. The results support significant $\beta$ convergence effects in all sectors in which employment growth is negatively correlated with their initial sectoral shares. Also, preferential policies targeting the western China have successfully stimulated faster sectoral employment growth. However, there are considerable sectoral heterogeneities when examining the effects of policies targeting the central and northeastern China. The results also reveal nonlinear effects of labor pooling economies proxied by initial total employment on sectoral employment growth for the majority sectors. A few other stylized facts are also in line with the expectation.

KEY WORDS:

• China’s counties
• preferential policy
• sectoral employment
• spatial distribution

JEL CLASSIFICATIONS:

• J21
• P25
• R11
• R12

Funding

This research was supported in part by the National Natural Science Foundation of China [grant number 71403126, 71403128]; Fundamental Research Funds for the Central Universities of Nanjing Agricultural University [grant number SKCX2016001]; Project of Priority Academic Program Development of Jiangsu Higher Education Institutions (PAPD).

Notes

1. With less than 10% of land size and 36% of total population, the east coastal region contributes more than 60% of China’s GDP in 2000. The “Western Development Strategy” covers six provinces (Gansu, Guizhou, Qinghai, Shaanxi, Sichuan, and Yunnan), five autonomous regions (Guangxi, Inner Mongolia, Ningxia, Tibet, and Xinjiang), and one municipality (Chongqing); the “Northeast Revival Strategy” covers three provinces: Heilongjiang, Jilin, and Liaoning, as well as the five eastern prefectures of Inner Mongolia; the “Rise of the Central China Plan” covers six provinces: Shanxi, Henan, Anhui, Hubei, Hunan, and Jiangxi.

2. For example, See http://www.businessinsider.com/higher-prices-leading-to-problems-for-chinas-big- cities-2011–2 for a Business Insider report about how higher cost push business to leave China’s large cities.

3. For example, since 2007, the Chinese Ministry of Commerce has designated a total of 50 cities as the priority relocation destinations in central and western China for the export-oriented processing industry and has given preferential financing and other benefits to eligible projects there.

4. Wang and Wan (2014) confirm that China’s annual population and employment statistics are misleading, and have failed to include many of the migrant and labor force flows between urban and rural areas.

5. We divide the 12 sectors that are comparable across the two censuses into four groups: agriculture (single sector), industry (including mining, manufacturing, and construction), market service (including information and communication, finance and insurance, real estate, renting and business service, research and technical service, wholesale and retail, traffic and storage, accommodation and catering, culture, sports and media, and household service), and non-market service (including education, government and social organization, and welfare). We left “others” sector from 2000 and “international organization” sector from 2010 aside, as it is hard to find a compatible match for them. This should not cause any substantial bias to the results as these two sectors are negligibly small in terms of absolute employment.

6. In China, county-level division is the third level of the administrative hierarchy, which contains counties, county-level cities, city districts under prefectures, banners, autonomous banners, and autonomous counties (minority ethnic groups denominated).

7. TSPC includes sectors such as transport, storage and post, accommodation and catering, wholesale and retail, etc. Please refer Figure 1 for details.

8. For a comprehensive review, please refer Chapter 10 in Combes, Mayer, and Thisse (2008).

9. In discussing income inequality, Haughton and Khandker (2009) list six criteria that make a good measure of inequality, namely: mean independence: This means that if all incomes were doubled, the measure would not change; symmetry: If you and I swap incomes, there should be no change in the measure of inequality; Pigou–Dalton Transfer sensitivity. Under this criterion, the transfer of income from rich to poor reduces measured inequality; decomposability: This means that inequality may be broken down by population groups or income sources or in other dimensions; statistical testability: One should be able to test for the significance of changes in the index over time.

10. Our weighting matrix is continuous rather than dichotomous. Each off-diagonal entry $[i,j]$ in the matrix is equal to 1/ (distance between county $i$ and county $j$. Thus, the matrix entries for pairs of points that are close together are higher than for pairs of points that are far apart.

11. Hanink, Ebenstein, and Cromley (2011) and Cheng et al. (2013) find higher Moran’s I indexes, either due to using more disaggregated sectoral employment data or focusing on a very small and highly concentrated region of China.

Additional information

Funding

This research was supported in part by the National Natural Science Foundation of China [grant number 71403126, 71403128]; Fundamental Research Funds for the Central Universities of Nanjing Agricultural University [grant number SKCX2016001]; Project of Priority Academic Program Development of Jiangsu Higher Education Institutions (PAPD).