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Relaxing Hukou - Increased Labor Mobility and China’s Economic Geography

Listed author(s):
  • Maarten Bosker
  • Steven Brakman
  • Harry Garretsen
  • Marc Schramm

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.

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File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3271.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3271.

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Date of creation: 2010
Handle: RePEc:ces:ceswps:_3271
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  1. de Sousa, José & Poncet, Sandra, 2011. "How are wages set in Beijing?," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 9-19, January.
  2. Au, Chun-Chung & Henderson, J. Vernon, 2006. "How migration restrictions limit agglomeration and productivity in China," Journal of Development Economics, Elsevier, vol. 80(2), pages 350-388, August.
  3. Ana Isabel Moreno‐Monroy, 2011. "Market access and the heterogeneous effect of shocks on wages: Evidence from Chinese cities," Papers in Regional Science, Wiley Blackwell, vol. 90(1), pages 9-25, 03.
  4. Knaap, Thijs, 2006. "Trade, location, and wages in the United States," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 595-612, September.
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