Migrants and Firms: Evidence from China
85 Pages Posted: 21 Feb 2019
Date Written: 2018
This paper estimates the causal effect of rural-urban migration on urban production in China. We use longitudinal data on manufacturing firms between 2001 and 2006 and exploit exogenous variation in rural-urban migration due to agricultural price shocks. Following a migrant inflow, labor costs decline and employment expands. Labor productivity decreases sharply and remains low in the medium run. A quantitative framework suggests that destinations become too labor-abundant and migration mostly benefits low- productivity firms within locations. As migrants select into high-productivity destinations, migration however strongly contributes to the equalization of factor productivity across locations.
Keywords: rural-urban migration, structural transformation, urban production
JEL Classification: D240, J230, J610, O150
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