The Lewis Model and the Harris-Todaro Model as well as the Neo-Schumpeterian theories regarding technological progress and searching-matching approaches supply theoretical framework for analyzing the causes of unemployment in China. A typical dual economic structure determines a large scale of migration from rural to urban areas with the significant development of agricultural economy and industrialization. In the process of transformation from centrally planed economy to market economy, a large number of redundant workers were released from the state owed enterprises. Due to the peak of labour force population, young labour entrants additionally enhanced the pressure of employment.
In essence, The Chinese economic development has been in an unprecedented period of large scale structural adjustment. Technological progress is regarded as the motivation of economic growth and structural adjustment. A so-called "creative destruction effect" enhanced mismatching between labour supply and labour demand, which induced increasing in unemployment in the modern labour market. Therefore, economic growth does not necessarily bring about employment growth, but even increases the level of unemployment in a certain period. In a medium- and long term, the issue of unemployment in China is mainly caused by structural factors.
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