Labor supply and expenditures: econometric estimation from Chinese household data

Guo, Zizhen
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This dissertation focuses on labor supply for urban and rural Chinese and the analysis of Chinese rural and urban household expenditures with welfare comparisons.

The first chapter uses data for individuals taken from the 2002 Chinese Household Income Project (CHIP) covering twelve provinces in urban China and twenty-two provinces in rural China to examine decisions of individual's probability of working, wage while working and labor supply. We assume a single wage elasticity for each group of individuals differed by gender and location, and assume fixed housing prices across the locations in urban and rural areas. We find a number of differences between women and men and between rural and urban areas for a given gender.

The second chapter develops the model in the first chapter from several aspects. We permit the estimated wage elasticities of labor supply for low, medium and high wage individuals to differ, and examine the effects of housing prices on labor supply. The results suggest that labor supply elasticities differ by the location of an individual in the wage distribution and high housing prices increase labor supply for urban men and women and rural men.

The third chapter examines Chinese rural and urban household expenditures on goods and services using an Almost Ideal Demand System (AIDS) fitted to provincial aggregate data over 2002-2011 and uses the estimated coefficients to provide estimates of income and price elasticities of demand for six commodity groups. We use these estimates to make welfare comparisons over time for rural and urban households. Our preferred rural-urban household welfare comparison shows that the welfare growing at approximately 1% per year for urban Chinese households and 1.5% for rural Chinese households and with a small amount of convergence (4%) over the study period.