Migration
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288
AEA PAPERS AND PROCEEDINGS
MAY 1999
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ity is ambiguous. However, where capital, risk, or human-capital constraints bind, these impacts are not likely to be zero as in the case of a perfect-markets, separable agricultural household model (e.g., I. Singh et al., 1986). The finding of a significant impact of migration or remittances on productivity would be evidence in support of the new economics of migration. Positive impacts would suggest that migration complements productivity growth in the farm sector by relaxing credit or risk constraints, while negative impacts would suggest that increased migration exacerbates labor shortages. Few tests of this NELM hypothesis have appeared in the literature; exceptions include Robert B. B. Lucas (1987) and Taylor (1992). Dwayne Benjamin and Loren Brandt (1998) find evidence that participation in migration loosens risk constraints on household-farm investments. If migrants play the role of financial intermediaries, as these studies suggest, the ex ante incentive to participate in migration may be large. However, households' propensity to encourage members to migrate may be mitigated when there are other ways to finance farm investments or if the loss of labor to migration canies a high cost in temis of forgone yields. n. Methods If production is constrained and migration, M, and remittances, /?. are important in shaping production constraints, constrained yield response, y*', depends on A/and ^ . ' The core equation of our model is;^ (2) K^ = y,, +
The current literature offers few insights into these fundamental questions about China's migration. This is true for a number of reasons, including a tendency to focus on only one dimension of migration in isolation from all others. By contrast, the new economics of labor migration (NELM) stresses the complexity of migration as an economic institution, the interrelationship between migration's determinants and impacts, and migrants as members of rural households (Oded Stark, 1991; Taylor and Martin, 1999). L Productivity Effects and the New Economics of Labor Migration Stark (1991) hypothesized that migrants play the role of financial intermediaries, enabling rural households to overcome credit and risk constraints on their ability to achieve the transition from familial to commercial production. This hypothesis is illustrated in Figure 1^ A household may invest a fixed resource, T (e.g., land or family labor), in either a lowproductivity or high-productivity technology, / , for/ = 0, l,respectively. An array of household characteristics, Zy, shapes productivity in each of these activities. PP represents the production possibility frontier (PPF), At relative prices p\lp», the household will specialize in the high-productivityJechnology, and its output will be 0 * = f(T,Zr), Suppose, however, that the household faces a market constraint on investing in the highproductivity technology, such that c( Ti) :£ K, c' (7"i) > 0. In the case of a credit or liquidity constraint, c(7"i) would denote the sunk cost of adopting the high-productivity strategy, and K would represent the household's available credit or liquidity for investing in this technology. For a risk constraint, c(Tf) would be a measure of risk (e.g., the output variance) associated with the high-productivity strategy, and K would be the maximum level of risk the household would he willing to bear in this technology. Family migrants. A/, could
Migration, Remittances, and Agricultural Productivity in China
By SCOTT ROZELLE, J. EDWARD tion of labor out of agriculture is a quintessential feature of economic development and modernization, both historically in developed countries and currently in developing ones. Approximately 70 percent of China's labor force is in the agricultural sector, a high level for a country with China's per capita income. If China follows the occupational migration pattem of other nations, a 10-percent increase in per capita GNP can conservatively be expected to decrease the share ofthe workforce employed in agriculture by 3.1 percentage points (Taylor and Philip Martin, 1999). As urbanization and GNP growth proceed in China, the outflow of resources from the farm sector and the rising demand for food will increase the pressure to raise agricultural productivity, and questions about the role that migration plays in China's development will grow more controversial and attract the attention of concerned policymakers. One of the reasons for controversy with respect to migration almost certainly lies in the fact that rural officials differ in their answers to a series of fundamental questions concerning migration and development. What factors trigger migration and motivate migrants to remit a portion of their incomes? How does large-scale migration affect agricultural productivity? Do remittances from migrants exacerbate or compensate for the labor leaving villages? Answers to these questions are critical for identifying the role that migration can play in meeting China's food needs, income objectives, and efficiency goals.
