Working Paper: NBER ID: w27767
Authors: Peiju Liao; Ping Wang; Yinchi Wang; Chong Kee Yip
Abstract: Allowing migration activity as an integral part of demographic transition and economic development, we establish a locational quantity-quality trade-off of children and explore its macroeconomic consequences. We construct a dynamic competitive migration equilibrium framework with rural agents heterogeneous in skills and fertility preferences. We then establish and characterize a mixed migration equilibrium where high-skilled rural agents with low fertility preferences always migrate to cities, low-skilled with high fertility preferences always stay, and only an endogenously determined fraction of high-skilled/high fertility preferences or low-skilled/low fertility preferences ends up moving. By calibrating our model to fit the data from China, we find interesting interactions between fertility and migration decisions in various counterfactual experiments with respect to changes in migration, population control and rural land entitlement policies. We conclude that overlooking the locational quantity-quality trade-off of children may lead to nonnegligible biases in assessing the implications and effectiveness of government policies.
Keywords: migration; fertility; economic development; China
JEL Codes: O15; O53; R23; R28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high-skilled rural agents with low fertility preferences (J49) | migrate to cities (R23) |
| low-skilled agents with high fertility preferences (J19) | stay in rural areas (R29) |
| fraction of high-skilled agents with high fertility preferences (J49) | migrate (F22) |
| fraction of low-skilled agents with low fertility preferences (J19) | migrate (F22) |
| marginal benefits of migration exceed marginal costs (F22) | rural workers continue migrating to cities (R23) |
| improved living conditions (I31) | reduction in childbearing (J13) |
| increased rural-urban migration (R23) | lower fertility rates (J13) |
| increased rural-urban migration (R23) | higher overall per capita output (P17) |
| relaxing population control policies (J18) | increased fertility rates (J13) |
| relaxing population control policies (J18) | impact on migration patterns (F22) |
| stricter population controls (J18) | deter high-skilled workers from migrating (J61) |
| deter high-skilled workers from migrating (J61) | negatively affect economic development (F69) |