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This section shows the empirical analysis of the determinants of the transfer of agricultural labor by the use of the panel data of China’s provinces and regions. Before the regression analysis, it is necessary to briefly introduce the methods of measuring to be used. In view of the fact that the core variables examined are likely to be affected by spatial correlation, the spatial econometric model is used for the regression analysis. The research by Xu Haiping and Wang Yuelong reveals that a significant autocorrelation exists in the urban–rural income gap in China’s provinces, municipalities and autonomous regions in terms of spatial distribution, and the studies by Luo Yongmin and Zhang Guangnan also indicate that infrastructure has spatial spillover effects.¹³ A spatial correlation may be derived from the system of economic variables under consideration or from the spatial correlation of the terms of error. Therefore, depending on the source of the effect of spatial correlation, the model of spatial measurement can be divided into the spatial autoregressive model (SAR) and the spatial error model (SEM). By reference to the practices in the above literature, both SAR and SEM models are used for analysis in this section to overcome the influence of potential spatial correlation and carry out maximum likelihood estimation. The same is also true for the setting of a spatial weight matrix. The weight coefficient of adjacent provinces is set as 1, and the weight coefficient of non-adjacent provinces is set as 0.¹⁴ The weight matrix is standardized in the specific measurement estimation. For purposes of comparison, the regression results under the two models are reported symmetrically in each table.

The following sample interval analyzed in this section is from 1992 to 2010 out of the main considerations: (1) It is an ideal research interval because it is generally believed that China’s reform and opening-up has entered a new stage, and the economic system of a comprehensive market has gradually been established after Deng Xiaoping’s southern talks in 1992.¹⁵ (2) Because of strict governmental control over labor mobility, the real climax of the transfer of labor did not begin until after Deng Xiaoping’s southern talks in 1992, though the transfer of agricultural labor in China started in the early stages of reform and opening-up. In fact, since 1992, the government’s attitude toward the transfer of labor has also changed from “allowed” to “encouraged”.¹⁶ Therefore, this section uses China’s provincial panel data regarding the period 1992–2010 for quantitative analysis to examine the driving factors of the transfer of agricultural labor.

The explained variable is the transfer of agricultural labor, and the key explanatory variables include the urban–rural income gap, the growth rate of the GDP, the level of infrastructure, total factor productivity and agricultural labor productivity (measured by the ratio of the total agricultural machinery power to the population employed in agriculture). In addition, a series of important variables are also introduced, including the degree of openness (measured by the ratio of the foreign direct investment (FDI) and the total volume of exports and imports to the GDP), the proportion of the total output of state-owned enterprises (measured by the proportion of state-owned and state-owned holding units in the value of the total output of the industrial sector), the scale and efficiency of financial development (using the ratio of total loans to GDP as an indicator of the scale of financial development, and the ratio of total loans to total deposits as a proxy variable for financial efficiency¹⁷) and the level of public education expenditure (measured by the public education expenditure per capita). In addition to these influence variables, the impact of other potential factors is also further considered, including the urban unemployment rate (measured by the registered urban unemployment rate and the surveyed urban unemployment rate estimated using urban household survey data), return on capital (measured by the ratio of the total profits of industrial enterprises to the net value of fixed assets of industrial enterprises) and the level of inflation (measured by consumer price indicator (CPI)). Theoretically, all these factors may affect the transfer of labor, so a regression analysis should be carried out to investigate the impact, with the following details.