ABSTRACT

In the pre-reform period，the planning system was born and served as a tool implementing heavy industry-oriented strategy. As the result of the reforms undergone in rural and urban sectors，labor market matures，labor mobility has augmented，and larger and larger part of workforce has been allocated through market forces. During the reform period，however，the uneven political influences between rural and urban residents keep alive the hukou system and segmentation of the labor market，and thus the appearance of this divide in China today is the inequality of resources possessions，which leads to the disparity in income and welfare between the two sectors. Since sustainable economic growth，social harmony and political stability are dependent of the narrowing of rural-urban gap，the hukou system reform has been initiated by governments at every level in the early of the new century. After over 20 years of economic reform，especially in the area of labor policies，to what extent is labor in China allocated by market forces，why are the institutional obstacles impeding labor mobility remained，in what areas are further reforms urgent，how should China undergo hukou system reform and related reforms？ This book，by providing an analytical framework of political economy and empirical studies，intends to answer those questions.

Chapter 1 reviews how the planning system before reform restricts labor mobility and what changes happen during the reform period，describing the current trend of labor migration and the characteristics of migrants. Labor mobility in China was strictly controlled by the authorities before the 1980s when central planning had typically implemented. Public security departments controlled place-to-place migration through the hukou system （Household Registration System），a unique institutional arrangement that segregates rural and urban areas strictly. Since the very beginning of China’s economic reform，reformation of the hukou system has been quietly in process. As a result，a large amount of labor force released from agriculture by the household responsibility system transformed to non-agricultural industry in rural areas.Then tens of millions of rural population moves into cities seeking for better jobs. And the 21^st century sees the reformation going on with unparalleled speed.

A host of unfinished tasks remain for labor market development in rural and urban China. The remaining hukou system is the legitimate base of all obstacles preventing labor market from developing. This remaining of hukou system has its economic and political reasons. This chapter then discusses the effects of migration on san-nong issue （three dimensions of agriculture-related issues） and sustained economic growth，arguing that more free labor mobility is an important source of long-term economic growth and plitical stability in China.

By employing an analytical framework based on institutional economics，chapter 2 investigates the rural-urban income gap in the entire period of pre-and post-reform. There are primarily two analytical paradigms for explaining the formation of urban biased policy in the process of economic development. One theoretical stream views the policy intention of urban bias as the logical result of implementing the strategy of industrializing an agriculture-dominated economy. While this paradigm mainly focuses on an explanation of government motives to adopt urban biased policy，another theoreical stream tries to explain how this urban bias is formed and why it exists from point of view of political economy. This theory argues that agriculture is disfavored in development because peasants are politically powerless in influencing policy-making，compared to their urban counterparts. The currently existing income gap between rural and urban sectors is a legacy of the planning system. After rural reform was initiated，the income gap between rural and urban people first narrowed，then widened again and has become severe in recent years. This chapter examines the changes in policy and their impacts on rural-urban divide in every period of reform，showing a change in patterns influencing rural-urban relationship during the reform period. In addition，the relationship between labor migration and “three dimensions of agriculture-related issues” （or sannong wenti）—the “issue of farmers’ income”，the“issue of rural development”，and the“issue of agricultural development”—is discussed in the chapter.

Chapters 3 and 4 examine labor mobility from viewpoint of rural development. There have been two hypotheses explaining motives of rural-to-urban migration. One is the hypothesis of absolute income gap that views migration as a response to large income gap between rural and urban areas.Another is the hypothesis of relative deprivation that considers migration as a response to relative income or income distribution in sending places—rural areas. Chapter 3 empirically tests both hypotheses by using evidence from poor areas of rural China.The implication is that by migrating to cities motivated by both absolute income gap and relative deprivation，Chinese farmers can simultaneously solve the poverty problems they face and change employment structure of the Chinese economy. Chapter 4 examines the role migration remittance plays in helping rural development by employing a host of empirical measures. First of all，intrafamily income transfer becomes an important means improving welfare of non-migration family members. Secondly，the income transters between rural and urban sectors through migration must be spent on consumption and investment，stimulating growth in capital-scarce rural areas.

Chapter 5 studies the relationship between changing pattern of urban development and migration policies theoretically and empirically. The city development pattern in Chinese transition economy distinguishes both from that in market economy and from that in traditional planned economic system. Both the market forces （such as the ability of self-financing） and the gaining resources by redistribution （impacts of hierarchy） work. It is because that during economic transition the stimuli of city are not unitary any more，so the patterns of city development are easy to diversify. Every city tends to develop by its own comparative advantages，no matter what the advantage is. However，cities relying on redistribution are more likely to block up migration，which distorts the structure of urbanization at national level. Based on the experiences from existing reforms，it is easy to find that urbanization is the result of overall marketization.Thus marketizing the social service and construction of infrastructure will speed up the changes from pattern of redistribution to self-financing pattern so as to improve the mechanism of urbanization in market economy.

Chapters 6 to 8 examine urban labor market protection and its results under the framework of political economy. Econometric analytical measures are used to describe and stylize several phenomena in urban-labor market during the transitional period. Under the hukou control，urban governments arranged planned migration through hukou quota in accordance with the labor need of urban development. Since the urban hukou was a scarce resource，the planners relaxed the quota when policy environment was easy，and they reduced the urban hukou quotas when facing a constrained economic environment. As far as the migration policy is concerned，the main determinant was productivity of grain，the bottleneck for feeding people in rural and urban areas in pre-reform period. After the reform，providing basic welfare and guaranteeing a secured employment became the primary pledge for urban citizens，while hukou quota remains unchanged，serving the goal of limiting the numbers of people who are entitled to benefit from the welfare system. Chapter 6 examines the two determinants in pre-and post-reform period.

Hukou system reform has been critical driving force for labor mobility. However，compared to reforms in other fields，still functioning hukou system remains unchanged，seriously impeding population migration across regions. The hukou system is the origin and legitimacy of discriminatory policies and regulations against migrants. Its existence leads to a variety of government measures discriminating against migrant workers in response to urban residents’ efforts of lobbying the policy protection.Chapter 7 discusses how these policies affect behavior of migrants，and chapter 8 statistically calculates the extent to which migrants’ pay is discriminated against by the plicies through job entry and differentiation in treatment.

Chapters 9 and 10 suggest the timing and areas of institutional reform. The urban residents’ major lobbying mechanism is through their“vote” and “voice”，something in which their rural counterparts are lacking. However，farmers have a way to “get around”the urban biased policies which are unfavorable to them. This “voting with their feet” eventually will drive the policy change. When the rural-urban income gap increases to the level of 1978，a critical point for institutional change will have been reached. Chapter 9 evidences that timing and conditions will be ripe for reform of the whole policy package on which the present rural-urban divide has been built. Chapter 10 suggests the areas in which further reforms are needed to promote labor market development. The proposed coordinated reforms relating to hukou system include：（1）paying off the arrears to state-owned enterprise workers，（2）allocating labor through market，（3）narrowing rural-urban gap in public services，and （4）creating employment opportunities.

In appendix a survey on migration researches is provided，which tries to picture the recent studies carried out by both Chinese and foreign scholars. As a conclusion of this survey，we suggest further direction and areas for migration studies in China.