Labor Mobility in China and India: The Role of Hukou, Caste, and Community

Major debates on the industrialization of agrarian economies view labor mobility—sectoral and spatial, from agriculture to industry and from villages and small towns to cities—as central to understanding the pace and nature of industrialization. Many see labor mobility as the result of the commercialization and capitalization of agriculture, which leads to an increasing number of peasants who are alienated from the land and must be absorbed by the expanding urban and industrial sector. Indeed, industrialization is seen as hinging on the successful, rapid, and smooth transfer of the so-called surplus labor from agriculture to nonagriculture. Land and labor productivity rises in agriculture as a result of the labor transfer, which enables it to contribute more capital resources to the developing industrial sector through terms of trade (TOT) favorable to industry. The labor transfer mobilizes the savings of the rural households directly or through taxes and provides a ready “home market” for industrial sector goods. Speedy development of the industrial sector itself, along with rural industrialization and increasing urbanization, takes care of the transferred labor from agriculture. Not only do the two sectoral, artificially neat distinctions present problems, but these models of the movement of labor and capital from agri-