Boosting rural labor off-farm employment through urban expansion in China

•Rural development is widely believed to interact with the structural transformation of an economy, but little is known about how this happens in developing countries.•This paper explores the impact of structural transformation on rural development through the lens of analyzing the role of urban growth in creating off-farm employment for rural labor in China. Contributing to the literature, we construct a global measure (e.g. the urban gravity index) to approximate structural transformation at the national level, which incorporates the complex spatial spill over effects of urban growth into a simple measure.•We use five waves of farm surveys for 1,234 households for the period of 2000–2018, matching with a newly constructed urban gravity index for 370 cities, and explore the impact of urbanization process on off-farm employment. Methodologically, we adopt the panel fixed effect model and choose alternative instruments at the city to identify urban growth from rural transformation.•We show that rapid urban growth in China has significantly contributed to rural development by increasing off-farm employment for rural labor by 15–18 million annually since 2000. Moreover, the positive impact started with the emergence of a few large metropolitan cities but ended with the growth of local, relatively small cities, suggesting the interaction between structural transformation and rural development is at a nationwide level.