Should Governments Promote or Slow the Pace of Urbanization? A Quantitative Analysis of the Internal Migration Restrictions in China

86 Pages Posted: 21 Jul 2020 Last revised: 15 Mar 2022

See all articles by Wenbin Wu

Wenbin Wu

Fudan University

Wei You

Peking University

Date Written: December 1, 2021

Abstract

Should governments promote or slow the pace of urbanization? In this paper, we provide the first estimate of the welfare effect of the hukou policy restricting internal migration in China by using a general equilibrium framework that incorporates agglomeration externalities and congestion forces. We find that removing migration restrictions in the largest cities would have 1) increased the national welfare by allowing more people to move into more productive locations, and 2) decreased the local welfare by pushing the population sizes over their locally optimal sizes. These results reveal a fundamental conflict between local and national interests in terms of desired population sizes.

Keywords: Urbanization; externalities; optimal city sizes; migration policies; hukou system

JEL Classification: R12; R13; R23; O18

Suggested Citation

Wu, Wenbin and You, Wei, Should Governments Promote or Slow the Pace of Urbanization? A Quantitative Analysis of the Internal Migration Restrictions in China (December 1, 2021). Available at SSRN: https://ssrn.com/abstract=3637557 or http://dx.doi.org/10.2139/ssrn.3637557

Wenbin Wu

Fudan University

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

Wei You (Contact Author)

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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