The declining share of agricultural employment in China: How fast?

Abstract

Between 1962 and 2013, China's agricultural employment share declined from 82% to 31%. The transfer of workers out of low-productivity agriculture is a fundamental pillar of China's aspirations to progress and eventually become a high-income economy. We hypothesize that the drivers of this decline have been the increase in income per capita, industrial value added, foreign direct investment and domestic credit. We use an Autoregressive Distributed Lag Model to test the strong exogeneity of the regressors. This is confirmed by the data and hence we use our model for forecasting. Results indicate that the share of employment in agriculture in China will decline to about 24% by 2020, the end of the 13th Five-Year Plan (2016–2020). We also estimate that China's employment share will reach 5%, the share observed in today's rich economies, by 2042–2048.