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Urbanization and/or rural industrialization in China

  • SONG, Huasheng
  • THISSE, Jacques-François
  • ZHU, Xiwei

We study urbanization and rural industrialization in a setting involving one urban region (U) and one rural region (R). Farmers are heterogeneous in their attitude toward migration, while firms' efficiency is higher in U than in R because agglomeration economies have been built in U. Farmers face three options: (i) working in the agricultural sector, (ii) setting up firms in R, or (iii) moving to U. There exists a unique equilibrium, which displays four different patterns. In the first one, both urbanization and rural industrialization occur simultaneously. In the second and third patterns, either urbanization or rural industrialization arises, whereas the last pattern involves an industrial core and an agricultural periphery. The conditions under which each pattern emerges are determined. The transfer of labor from the agricultural to the industrial sector always increases farmers' welfare, while the welfare impact on incumbent urban workers is ambiguous.

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File URL: http://dx.doi.org/10.1016/j.regsciurbeco.2011.08.003
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2338.

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Handle: RePEc:cor:louvrp:-2338
Note: In : Regional Science and Urban Economics, 42(1-2), 126-134, 2011
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  1. Tabuchi, Takatoshi & Thisse, Jacques-François, 2001. "Taste Heterogeneity, Labour Mobility and Economic Geography," CEPR Discussion Papers 3114, C.E.P.R. Discussion Papers.
  2. Sandra PONCET, 2002. "A Fragmented China. Measure and Determinants of Chinese Domestic Market Disintegration," Working Papers 200221, CERDI.
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  5. Hu, Dapeng, 2002. "Trade, rural-urban migration, and regional income disparity in developing countries: a spatial general equilibrium model inspired by the case of China," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 311-338, May.
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  8. Kung, James Kai-sing & Lin, Yi-min, 2007. "The Decline of Township-and-Village Enterprises in China's Economic Transition," World Development, Elsevier, vol. 35(4), pages 569-584, April.
  9. Whalley, John & Zhang, Shunming, 2007. "A numerical simulation analysis of (Hukou) labour mobility restrictions in China," Journal of Development Economics, Elsevier, vol. 83(2), pages 392-410, July.
  10. Putterman, Louis, 1997. "On the past and future of china's township and village-owned enterprises," World Development, Elsevier, vol. 25(10), pages 1639-1655, October.
  11. Chun-Chung Au & Vernon Henderson, 2002. "How Migration Restrictions Limit Agglomeration and Productivity in China," NBER Working Papers 8707, National Bureau of Economic Research, Inc.
  12. Poncet, Sandra, 2006. "Provincial migration dynamics in China: Borders, costs and economic motivations," Regional Science and Urban Economics, Elsevier, vol. 36(3), pages 385-398, May.
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