Relaxing Hukou - Increased Labor Mobility and China's Economic Geography
University of Groningen
University of Groningen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
University of Utrecht - Utrecht University School of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Radboud University Nijmegen - Department of Economics
University of Utrecht - Faculty of Law
December 9, 2010
CESifo Working Paper Series No. 3271
China’s Hukou system poses severe restrictions on labor mobility. This paper assesses the consequences of relaxing these restrictions for China’s internal economic geography. We base our analysis on a new economic geography model. First, we obtain estimates of the important model parameters on the basis of information on 264 of China’s prefecture cities over the period 1999-2005. Second, and by using our estimation results as input, we simulate various long-run scenarios of China’s internal economic geography that differ in their degree of interregional labor mobility. We find that increased labor mobility will lead to more pronounced core-periphery outcomes. Interestingly, these agglomerations are not necessarily along the coastal regions. Given the increased importance of China’s internal market, firms agglomerate in the populous heartland of China. China’s internal demand will be the most important determinant of its future economic geography.
Number of Pages in PDF File: 41
JEL Classification: O18, R11, R12working papers series
Date posted: December 10, 2010
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