Working Paper: CEPR ID: DP13487
Authors: Pierre-Philippe Combes; Sylvie Demurger; Shi Li; Jianguo Wang
Abstract: We assess the role of internal migration and urbanisation in China on the nominal earnings of three groups of workers (rural migrants, low-skilled natives, and high-skilled natives). We estimate the impact of many city and city-industry characteristics that shape agglomeration economies, as well as migrant and human capital externalities and substitution effects. We also account for spatial sorting and reverse causality. Location matters for individual earnings, but urban gains are unequally distributed. High-skilled natives enjoy large gains from agglomeration and migrants at the city level. Both conclusions also hold, to a lesser extent, for low-skilled natives, who are only marginally negatively affected by migrants within their industry. By contrast, rural migrants slightly lose from migrants within their industry while otherwise gaining from migration and agglomeration, although less than natives. The different returns from migration and urbanisation are responsible for a large share of wage disparities in China.
Keywords: Urban Development; Agglomeration Economies; Wage Disparities; Migrants; Human Capital Externalities; China
JEL Codes: O18; R12; R23; J31; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| highskilled natives (J61) | nominal earnings (J31) |
| higher migrant ratio in cities (R23) | nominal earnings of highskilled urban natives (J39) |
| lowskilled natives (J69) | nominal earnings (J31) |
| higher migrant ratio in cities (R23) | nominal earnings of lowskilled natives (J31) |
| rural migrants (R23) | nominal earnings (J31) |
| competition from migrants (F22) | nominal earnings of lowskilled natives (J31) |
| competition from other migrants (F22) | nominal earnings of rural migrants (F24) |