China's poverty alleviation “miracle” from the perspective of the structural transformation of the urban–rural dual economy

PurposePoverty alleviation has been a major theme of China's modernization process since the founding of New China. This paper points out that China's poverty alleviation process presents three stylized facts: “Miraculous” achievements of poverty alleviation have been made on a global scale; the poverty alleviation achievements mainly occurred in the high growth stage after reform and opening up; the poverty alleviation process is accompanied by the structural transformation of the urban–rural dual economy.Design/methodology/approachTherefore, a logically consistent analytical framework should form among the structural transformation of the dual economy, economic growth and the achievements in poverty alleviation. In logical deduction, the structural transformation of the dual economy affects rural poverty alleviation through the effects of labor reallocation, agricultural productivity improvement, demographic change and fiscal resource allocation.FindingsThe first two refer to economic growth, and the latter two are alleviation policies. The combination of economic growth and poverty alleviation policies is the main cause for poverty alleviation performance. China's empirical evidence can support the four effects by which the structural transformation of the dual economy affects poverty alleviation.Originality/valueChina's socialist system and its economic system transformation after reform and opening up provide an institutional basis for the effects to come into play. After 2020, China's poverty alleviation strategies will enter the “second-half” phase, namely, the phase of solving the problems of relative poverty in urban and rural areas by adopting conventional methods and establishing long-term mechanisms. This requires the facilitation of the reconnection between poverty alleviation strategies and the structural transformation of the dual economy in terms of development ideas and policy directions.

Structure and Structural Change in Macroeconomic Theory

Macroeconomic models are built on causal structures that reflect choices made with respect to the variables that are solved from the model and those assumed exogenous. These choices are the ‘closures’ of the model. Differences in closures can lead to stark qualitative differences in the model’s solutions of macroeconomic equilibrium, and should therefore reflect the basic structure of the economy. In order to highlight these differences, closures are discussed first in the context of one-sector models. Closing mechanisms become even more consequential for models that formalize economies with multiple sectors. The second part of the chapter thus extends the discussion to multi-sector models and, particularly, to dual economy models. These models are especially relevant for understanding the process of structural change in developing countries and its implications for growth and development.