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The effect of migration policy on growth, structural change, and regional inequality in China

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  • Hao, Tongtong
  • Sun, Ruiqi
  • Tombe, Trevor
  • Zhu, Xiaodong
Abstract
Between 2000 and 2015, China’s aggregate income quadrupled, its provincial income inequality fell by a third, and its share of employment in agriculture fell by a half. Internal migration is central to this transformation, with the number of internal migrant workers reaching 300 million by 2015. Combining rich data on migration with a spatial general equilibrium model of China’s economy, we quantify the size and the impact of internal migration cost reductions in China between 2000 and 2015. During the 15-year period, China’s internal migration costs fell by forty-five percent. In addition to contributing substantially to growth, these migration cost changes account for the majority of the reallocation of workers out of agriculture and the drop in regional inequality. We compare the effect of migration policy changes with other important economic changes, including changes in trade costs, capital market distortions, average cost of capital, and productivity. While each contributes meaningfully to growth, migration policy changes are central to China’s structural change and regional income convergence. We also find that the recent slow-down in aggregate economic growth between 2010 and 2015 is associated with smaller reduction in inter-provincial migration costs and a larger role of capital accumulation.

Suggested Citation

  • Hao, Tongtong & Sun, Ruiqi & Tombe, Trevor & Zhu, Xiaodong, 2020. "The effect of migration policy on growth, structural change, and regional inequality in China," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 112-134.
    • Handle: RePEc:eee:moneco:v:113:y:2020:i:c:p:112-134
    DOI: 10.1016/j.jmoneco.2020.03.003
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    2. Holger Sieg & Chamna Yoon & Jipeng Zhang, 2020. "The Impact of Migration Controls on Urban Fiscal Policies and the Intergenerational Transmission of Human Capital in China," NBER Working Papers 27764, National Bureau of Economic Research, Inc.
    3. Tasso Adam & Loren Brandt & Chaoran Chen & Diego Restuccia & Xiaoyun Wei, 2024. "Land Security and Mobility Frictions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(3), pages 1941-1987.
    4. Sandro M. Reia & P. Suresh C. Rao & Marc Barthelemy & Satish V. Ukkusuri, 2022. "Spatial structure of city population growth," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    5. Xiameng Pan & Chang Sun, 2023. "Internal Migration, Remittances and Economic Development," CESifo Working Paper Series 10623, CESifo.
    6. Huoqing Cao & Chaoran Chen & Xican Xi & Sharon Xuejing Zuo, 2024. "Family migration and structural transformation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(3), pages 753-776, August.
    7. Alison Booth & Richard Freeman & Xin Meng & Jilu Zhang, 2022. "Trade Unions and the Welfare of Rural-Urban Migrant Workers in China," ILR Review, Cornell University, ILR School, vol. 75(4), pages 974-1000, August.
    8. Shengqin Wu & Degang Yang & Fuqiang Xia & Xinhuan Zhang & Jinwei Huo & Tianyi Cai & Jing Sun, 2022. "The Effect of Labor Reallocation and Economic Growth in China," Sustainability, MDPI, vol. 14(7), pages 1-22, April.
    9. Qingen Gai & Naijia Guo & Bingjing Li & Qinghua Shi & Xiaodong Zhu, 2021. "Migration Costs, Sorting, and the Agricultural Productivity Gap," Working Papers tecipa-693, University of Toronto, Department of Economics.
    10. Yang, Xiaoliang & Barros, Lucy & Matthews, Kent & Meenagh, David, 2024. "The dynamics of redistribution, inequality and growth across China’s regions," Journal of Policy Modeling, Elsevier, vol. 46(3), pages 613-637.
    11. Holger Sieg & Chamna Yoon & Jipeng Zhang, 2023. "The Impact Of Local Fiscal And Migration Policies On Human Capital Accumulation And Inequality In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 57-93, February.
    12. Cao, Huoqing & Chen, Shiyi & Xi, Xican, 2023. "Aging, migration, and structural transformation in China," Economic Modelling, Elsevier, vol. 126(C).
    13. Egger, Peter H. & Loumeau, Gabriel & Loumeau, Nicole, 2023. "China's dazzling transport-infrastructure growth: Measurement and effects," Journal of International Economics, Elsevier, vol. 142(C).
    14. Xiao Ma, 2024. "College Expansion, Trade, And Innovation: Evidence From China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 315-351, February.
    15. Liu, Chen & Ma, Xiao, 2023. "Migration, tariffs, and China's export surge," Journal of International Economics, Elsevier, vol. 140(C).
    16. Dongshui Xie & Caiquan Bai & Weiwei Xiao, 2022. "Institutional environment, development model transformation and North–South economic disparity in China," Growth and Change, Wiley Blackwell, vol. 53(4), pages 1877-1906, December.
    17. Xiao Yan & Saidatulakmal Mohd, 2023. "Trends and Causes of Regional Income Inequality in China," Sustainability, MDPI, vol. 15(9), pages 1-18, May.
    18. Dianshuang Wang & Xiaochun Li & Zixin Hu & Run Yuan, 2023. "Labor market distortion and its impact on wage inequality in the modernization of small‐scale agriculture," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 988-1007, December.
    19. Michiel Gerritse & Zhiling Wang & Frank van Oort, 2024. "Industrial Transfer Policy in China: Migration and Development," Tinbergen Institute Discussion Papers 24-020/VIII, Tinbergen Institute.
    20. Pan, Xiameng & Sun, Chang, 2024. "Internal migration, remittances and economic development," Journal of International Economics, Elsevier, vol. 147(C).
    21. Lili Wang & Xue Qiao & Jidong Chen, 2023. "Labor Mobility Barriers and Agricultural Productivity in China: Analysis Based on a General-Equilibrium Roy Model," Annals of Economics and Finance, Society for AEF, vol. 24(2), pages 377-399, November.

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    More about this item

    Keywords

    Migration; Spatial misallocation; Regional convergence; Structural change; China;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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