Fiscal Decentralization, Rural Industrialization and Undocumented Labour Mobility in Rural China, 1982–87

Chen Y. P. Fiscal decentralization, rural industrialization and undocumented labour mobility in rural China, 1982–87, Regional Studies. This paper explores the relationship between fiscal decentralization, which gave greater rural industrialization and fiscal authority to local governments, and the emergence of rural–rural undocumented inter-provincial labour migration during China's initial reform period. A Heckman model is employed to correct for the zero observation problems and to estimate consistently the labour mobility with a modified gravity equation. Given the institutional barriers, the fiscal decentralization has two contending effects on labour market integration: local economic development promotes labour mobility, but local public goods crowding restrains the inflow of labour at the destination. The crowding effect is stronger at lower levels of government.