Estimating China's Rural Labor Surplus: A Dynamic General Equilibrium Analysis

China's dramatic economic growth during the past three decades has been characterized by rapid industrialization fueled by a large pool of rural surplus labor in the agricultural sector. The large-scale movement of workers from the agricultural to the industrial and service sectors raises pertinent questions about sustainability: Is there still a pool of surplus workers in rural China? If there is, how large is it, and how long can it last? These questions are debated in China. The present study contributes to the discussion by providing a quantitative framework with which to estimate the size of the surplus labor pool under various scenarios. Applying a dynamic general equilibrium model of the Chinese economy, we present our estimates of the size of the rural labor surplus from 1997 to 2005 and forecast its size from 2006 to 2015. Two scenarios are presented: one is business-as-usual, the other an accelerated improvement of labor productivity in China's agricultural sector.