Working Paper: CEPR ID: DP8106
Authors: Maarten Bosker; Steven Brakman; Harry Garretsen; Marc Schramm
Abstract: 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.
Keywords: China; Economic Geography; Labor Mobility
JEL Codes: O18; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| relaxing hukou restrictions (R28) | increased labor mobility (J62) |
| increased labor mobility (J62) | pronounced core-periphery outcomes (F61) |
| increased labor mobility (J62) | concentration of economic activity in populous heartland regions (R11) |
| increased labor mobility (J62) | agglomeration of firms in regions with higher internal demand (R32) |
| agglomeration of firms in regions with higher internal demand (R32) | changes in economic activity distribution (D39) |
| relaxing hukou restrictions (R28) | changes in economic geography (R12) |