Chinese Rural Industrial Productivity and Urban Spillovers

Yusheng Peng, Lynne G. Zucker, Michael R. Darby

NBER Working Paper No. 6202
Issued in September 1997
NBER Program(s):Productivity, Innovation, and Entrepreneurship

Chinese rural industry has grown three times faster than national GDP, surpassing agriculture in size in 1987, and now nearing half of the total Chinese economy. We use a rich, new county-level data set to explore this dramatic growth. We find that a Cobb-Douglas production function explains over 80 percent of across-county variation in 1991 rural industrial output per capita, with little role for idiosyncratic regional or provincial fixed effects. There is a very large effect on productivity from being near cities (30 to 35 percent higher productivity for a county one standard deviation above average in nearness to population centers) due to embodied technology transfer from urban residents. We find strong support for the hypothesis that saving from past agricultural income has provided start-up capital for rural enterprises. However, higher land-labor ratios lead to greater allocation of labor and capital to agriculture instead of industry, although induced inflow of migrants reduces the effect on industrial labor. Nearness to cities and more education increase capital and labor in rural industry. Substantial explanatory power (one third or more) for industrial labor and capital is attributed to provincial fixed effects, possibly reflecting local commercial and migration policies.

download in pdf format
   (1481 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6202

Users who downloaded this paper also downloaded* these:
Ferraz and Finan w14937 Electoral Accountability and Corruption: Evidence from the Audits of Local Governments
Wei and Wu w8611 Globalization and Inequality: Evidence from Within China
Glaeser, La Porta, Lopez-de-Silanes, and Shleifer w10568 Do Institutions Cause Growth?
Gordon w3393 The Phillips Curve Now and Then
Duflo w8061 Grandmothers and Granddaughters: Old Age Pension and Intra-household Allocation in South Africa
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us