Achieving inclusive urbanization through county-led industrial specialization: from the perspective of rural labor supply

Purpose The role of intermediate urban centers (IUCs) (like towns/small cities/rural counties) between large cities and villages in leading urbanization has been increasingly highlighted. This article conceptually and empirically examines what types of industrial agglomeration (specialized or diversified agglomeration) of rural county in China would provide a more inclusive and efficient local labor market for rural workers to be inclusively urbanized. Design/methodology/approach We employ a three-stage labor supply model to theoretically generalize the decisions of rural workers to migrate to large city, to undertake nonfarm jobs in rural counties and the length of nonfarm jobs. Then, combining three national-level datasets of China (National Economic Census (NEC), China Household Income Project (CHIP) and the China county statistical yearbook), we explore how the type of industrial agglomeration in a rural county affects the labor supply decision of rural workers. Findings We show that rural workers in rural counties with higher level of industrial specialization are more likely to: (1) work locally than migrating to large cities; (2) find nonfarm jobs by themselves instead of relying on social networks (3) find a more stable and formal nonfarm job. These effects are significant when rural counties specialize in industries that they have local comparative advantages compared to large cities. This work provides insights into achieving inclusive urbanization by developing industry specialization in rural counties in China, which may also be useful for other developing countries. Originality/value First, the conceptual framework of this paper extends the basic model of rural-urban migration longstanding in the literature, to a multi-choice and three-stage labor supply model. Second, we empirically quantify the industrial structure of rural counties using unique dataset, which has been emphasized in the development economics literature but neglected due to data limitations. Third, this paper expands our understanding of the role of rural counties in inclusive urbanization and contributes to the future development of the county-led urbanization policies.