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How migration restrictions limit agglomeration and productivity in China

Au, Chun-Chung and Henderson, J. Vernon (2006) How migration restrictions limit agglomeration and productivity in China. Journal of Development Economics, 80 (2). pp. 350-388. ISSN 0304-3878

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Identification Number: 10.1016/j.jdeveco.2005.04.002

Abstract

China strongly restricts rural–urban migration, resulting in a well acknowledged surplus of labor in agriculture. But migration is also restricted within sectors. This paper argues that these intra-sector restrictions lead to insufficient agglomeration of economic activity in both the rural industrial and urban sectors, with resulting first order losses in GDP. For urban areas the paper estimates a city productivity relationship, based on city GDP numbers. The effects of access, educational attainment, FDI, and public infrastructure on productivity are estimated. Given these, worker productivity is shown to be an inverted U-shape function of city employment, with the peak point shifting out as industrial composition moves from manufacturing to services, as predicted by urban theory. As far as we know this is the first paper to actually estimate the relationship between output per worker and city scale for any country. The majority of Chinese cities are shown to be potentially undersized—below the lower bound on the 95% confidence interval about the size where their output per worker peaks. The paper calculates the large gains from increased agglomeration in both the rural industrial and urban sectors.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/03043...
Additional Information: © 2004 Elsevier B.V.
Divisions: Geography & Environment
Subjects: G Geography. Anthropology. Recreation > G Geography (General)
H Social Sciences > HB Economic Theory
JEL classification: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J60 - General
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O10 - General
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R10 - General
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R20 - General
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R30 - General
Date Deposited: 11 Sep 2013 09:14
Last Modified: 08 Oct 2024 04:00
URI: http://eprints.lse.ac.uk/id/eprint/52085

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