We exploit the implementation of a rural pension policy in China to estimate the average rural-to-urban migration cost for workers affected by the policy and the average underlying sectoral productivity difference. Our estimates, based on a large panel data set, reveal significant migration costs and substantial sectoral productivity differences, with sorting playing a minor role in accounting for sectoral labor income gaps. We construct and structurally estimate a general equilibrium household model with endogenous labor supply and migration. The results of this model align with the reduced-form findings and illustrate how the rural pension policy influences migration, GDP, and welfare through improving within-household labor allocation. Counterfactual analyses based on the model show that the positive effects of the policy remain even if migration costs were significantly lower, and that scaling up the rural pension policy would lead to even larger improvements in labor allocation, GDP, and welfare.
Academic & Professional Qualification
- Ph.D. (economics), University of Chicago, 1991
- M.S. (statistics), Wuhan University, 1985
- B.S. (mathematics), Wuhan University, 1982
Biography
Xiaodong Zhu joined the Faculty of Business and Economics at the University of Hong Kong as a professor in 2022. Prior to that, he was a professor in the Department of Economics at the University of Toronto, where he taught for 30 years. He is a leading expert on the Chinese economy and his research on China has been published in top economics journals such as the American Economic Review, Journal of Political Economy, Journal of Monetary Economics, International Economic Review, Journal of Development Economics, Review of Economic Dynamics, and Journal of Economic Perspectives.
Teaching
- China in the Global Economy (undergraduate common core course)
- Topics in Macroeconomic Research of China (for graduate students)
Research Interests
- Chinese Economy
- Growth and Development
- Macroeconomics
Selected Publications
- “Trade Wars and Industrial Policy Competitions” (with Jiandong Ju, Hong Ma, and Zi Wang), forthcoming in Journal of Monetary Economics.
- “Finance, Endogenous TFP, and Misallocation” (with Chaoran Chen and Ashique Habib), American Economic Review: Insight, 5 (3), 409-426, 2023.
- “Structural Change and Aggregate Employment Fluctuations in China” (with Wen Yao), International Economic Review, 62 (1), 65-100, 2021.
- “The Varying Shadow of China’s Banking System”, Journal of Comparative Economics, 49 (1), 135-146, 2021.
- “The Effect of Migration Policy on Growth, Structural Change, and Regional Inequality in China” (with Tongtong Hao, Ruiqi Sun, and Trevor Tombe), Journal of Monetary Economics, 113, 112-134, 2020.
- “Trade, Migration, and Productivity: A Quantitative Analysis of China” (with Trevor Tombe), American Economic Review, 109 (5) 1843-72, 2019.
- “Factor Market Distortions across Time, Space and Sectors in China” (with Loren Brandt and Trevor Tombe), Review of Economic Dynamics, 16, 39-58, 2013.
- “Modernization of Agriculture and Long-Term Growth” (with Dennis Tao Yang), Journal of Monetary Economics, 60, 367-382, 2013.
- “Understanding China’s Growth”, Journal of Economic Perspectives, 26 (4), 103-124, Fall 2012
- “Agriculture and aggregate productivity: A quantitative cross-country analysis” (with Diego Restuccia and Dennis Tao Yang), Journal of Monetary Economics, 55 (2), pp. 234-250, March 2008.
- “Fiscal Shocks and Fiscal Risk Management,” (with Huw Lloyd-Ellis), Journal of Monetary Economics, 48, pp.309-38, 2001.
- “Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform,” (with Loren Brandt), Journal of Political Economy, 108, pp.422-39, 2000.
- “Optimal Fiscal Policy in a Stochastic Growth Model,” Journal of Economic Theory, 58, pp. 250-89, 1992.
Recent Publications
1Sep
1 Sep 2025
Econometrica