Productivity and structural change in China

This paper develops a new analytical framework account for the determinants of employment shares between industries in China. Empirical evidence shows that the first industry has the lowest TFP growth rate; the third industry is the second. The labor force would flow into the sector with lower growth rate of TFP if the price elasticity of demand is low. The employment share in the first industry would fall with the increase of the individual income. It has the positive impact on the employment share of the second industry and the third industry. The employment structure is found to be negative affected by the growth of capital per labor.