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China's economic growth and employment growth relationship

Author: CaoJianYun
Tutor: GuoZhiYi
School: Lanzhou University
Course: Regional Economics
Keywords: Economic growth Employment increase Okun’s law Employment elasticity
CLC: F124
Type: PhD thesis
Year: 2008
Downloads: 1707
Quote: 8
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Abstract


Economic growth and full employment are main objectives of macro-economic policy of a country.Judging from the history of all the countries in the world, economic growth generally has a positive correlation with employment increase,that is to say,the higher the economic growth rate is,the more the employed labor force will be.China has got a rapid development since the reform and opening with an annual average GDP growth rate of 9.64%during 1978-2005,by contrast,the average increase rate of employed population is only 2.38%at the same time,which leads to the coexistence of high growth and low employment.What’s the relationship between China’s economic growth and employment increase since 1978? Can it be revealed by Okun’s law? In order to answer those questions,the paper,on the basis of traditional theories in the west,studies the relationship between the China’s economic growth and employment increase,and the results suggest that the relationship deviates from the traditional theories in the following aspects:firstly,there was a slight negative correlation between the rate of economy growth and employment increase with Pearson correlation coefficient of -0.015 during 1978-2005;secondly,economy growth is not the Granger causality of employment increase,which shows the rapid growth of China’s economy has not effectively promoted the employment increase; thirdly,Okun’s Law is failure in China;fourthly,the employment elasticity has been low with a trend of continuously decrease since 1990s,while it is fundamentally different from that in the developed countries which is the inevitable outcome of rapid development and high productivity.The paper holds that there are varies reasons for the deviation of the relationship from tradition theories,such as the mode of economic growth,technological progress, unreasonable industrial structure,system reforming and the imperfect labor market and so on.Employment has something important to do with people’s living and social stability,full employment is necessary not only for the sustainable development of China’s economy but for the construction of a harmony society.Facing the protracted situation of excessive supply of the labor force,great importance should be attached to the employment.The paper suggests that the importance of strategic target of "employment first" should be fully recognized first of all,and corresponding measures should be taken in the process of choosing technology routes,adjusting the industrial structure,developing the labor market etc..Only in this way,can we solve the serious problem of employment fundamentally and maintain social stability.

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CLC: > Economic > The world economic profiles,economic history,economic geography > China's economy > Economic construction and development
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