Coexistence of surplus labor and the Lewis turning point in China: a unitary household decision-making model study

This paper discusses the underlying relationship between surplus labor and the Lewis turning point in the duration of rapid economic growth in China. An agent-based model was proposed for studying the Lewis turning point and labor resource allocation, in which the decision-making interactions were made among the members of a household. This model differs from traditional development economics theory in which only an individual’s behavior is considered. How peasant households allocate their human capital to maximize the utility of a household unit was investigated on the basis of the unitary principle under the assumption of risk aversion. The roles of living expenses, subsidies and income adjustment factors were also considered. Our results revealed the paradoxical phenomenon that rural surplus labor and the Lewis turning point coexist.