Has China passed its Lewis Turning Point? - A study of regional variation

Abstract: This paper examins the dynamic relationship between the supply of labor and wages in the Chinese agricultural sector using the Lewis model. The Lewis model predicts that as economic growth takes of in a low-income country, wokers will move from the industrial sector and at a certain point called "the Lewis turning point" surplus lbor in the agricultural sector will be depleted and this will lead to sharply increased wages. This study uses provincial level data to estimate the turning point for China between 1996-2011 on both a national and regional level. The turning point is determined by comparing the marginal product of labor and wages in the agricultura sector. The result indicatesthat the national turning point occured in 2006 and that there is a wide variation in the timing of the turning point on a regional level