Peter Robertson, Longfeng Ye, 11 September 2017

The conventional wisdom is that labour reallocation has been a key driver of China’s growth miracle, and slowing migrant labour flows and rapid wage growth have raised concerns over whether this source of growth has run its course. This column argues that the literature on growth and labour reallocation in China has been dominated by a method that, relative to the now standard growth accounting model, substantially overstates the gains. Allowing for this and for human capital differences across sectors, sectoral labour reallocation has not been a key source of productivity growth in China.