Aging, migration, and structural transformation in China

This paper studies the interaction of laborforce aging and structural transformation in China. Empirically, laborforce aging has occurred much faster in agriculture, and rural–urban migration, the key driving force of structural transformation, was lower among old workers. We build a two-sector spatial equilibrium model featuring heterogeneous migration costs across workers. Our quantitative exercises calibrate the model to the Chinese data, implying that the higher migration costs facing old workers account for about 1/3 of laborforce aging in agriculture between 2000 and 2010. Furthermore, the aging of the aggregate labor force slows the reallocation of labor from agriculture by 1.6 percentage points.