ABSTRACT
China has witnessed the largest labor migration in the world since the reform and opening policy began 30 years ago. The “household responsibility system” initiated in the late 1970s made rural households the residual claimants of their marginal production efforts, which solved the longstanding incentive problems associated with egalitarian compensation rules created in the commune system (Meng, 2000). At the same time, the pricing system for agricultural products was changed, which brought an increase in agricultural productivity, creating a labor surplus in agriculture. The higher labor return in non-agricultural sectors motivated this rural surplus to migrate away from agriculture (Cook, 1999; Cai et al., 2003; Fan, 2008).
