How Integrated Are Chinese and Indian Labor into the World Economy?

Date Published:

Abstract:

China and India are similar in many ways. Both are populous, physically large, socially diversified, economically poor countries. In 1978 they had roughly the same per capita GDP in terms of purchasing power parity (Maddison, p.304). But their labor forces have very different characteristics. A significantly higher fraction of China’s population is in economic employment, China is significantly more urbanized, less of China’s labor force is in agriculture, and in rural areas a significantly higher fraction of rural employment is non-agricultural. Population growth in both countries has declined significantly in recent decades, but the decline has been markedly sharper in China. India has significantly greater protection against imports than China, although it has lowered non-agricultural tariffs in recent years. India is less hospitable to foreign direct investment (FDI) than is China, and is more dependent on official foreign assistance. By 2000 India’s real per capita GDP had doubled from 1978; China’s had nearly quadrupled. These differences, and others, influence the degree of integration of these economies into the world economy, and in particular the role that their labor forces play in the world economy.

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