Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Marina Halac • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 2025, Volume 93, Issue 5

Rural Pensions, Labor Reallocation, and Aggregate Income: An Empirical and Quantitative Analysis of China

https://doi.org/10.3982/ECTA19699
p. 1663-1696

Qingen Gai|Naijia Guo|Bingjing Li|Qinghua Shi|Xiaodong Zhu

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.


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Supplemental Material

Supplement to "Rural Pensions, Labor Reallocation, and Aggregate Income: An Empirical and Quantitative Analysis of China"

Qingen Gai, Naijia Guo, Bingjing Li, Qinghua Shi, and Xiaodong Zhu

This supplement contains material not found within the manuscript.

Supplement to "Rural Pensions, Labor Reallocation, and Aggregate Income: An Empirical and Quantitative Analysis of China"

Qingen Gai, Naijia Guo, Bingjing Li, Qinghua Shi, and Xiaodong Zhu

The replication package for this paper is available at https://doi.org/10.5281/zenodo.15354006. The authors were granted an exemption to publish their data because either access to the data is restricted or the authors do not have the right to republish them. Therefore, the replication package only includes the codes but not the data. However, the authors provided the Journal with (or assisted the Journal to obtain) temporary access to the data. The Journal checked the restricted data and the provided codes for their ability to reproduce the results in the paper and approved online appendices.


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