Educational Choice, Rural-urban Migration and Economic Development
Observing rapid structural transformation accompanied by a continual process of rural to urban migration in many developing countries, we construct a micro founded dynamic framework to explore how important education-based migration is, as opposed to work-based migration, for economic development, urbanization and city workforce composition. We then calibrate our model to fit the data from China over the period from 1980 to 2007, a developing economy featuring not only large migration flows but major institutional reforms that may affect work and education based migration differently. We find that, although education-based migration only amounts to one-fifth of that of work-based migration, its contribution to the enhancement of per capita output is larger than that of work-based migration. Moreover, the abolishment of the government job assignment for college graduates and the relaxation of the work-based migration have limited effects on economic development and urbanization. Furthermore, the increase in college admission selectivity for rural students plays a crucial but negative role in China's development, lowering per capita output and worsening the high-skilled employment share in urban areas.
We are grateful for comments from Kaiji Chen, Chang-Tai Hsieh, B. Ravikumar, and Michael Song, as well as participants at the AREUEA-ASSA Annual Meetings, the Asian Meetings of the Econometric Society, the Conference on Chinese Economy at Tsinghua University, the Asian Bureau of Finance and Economic Research Conference, the Midwest Macro Meetings, the Public Economic Theory conference, the Society for Advanced Economic Theory Conference, the Symposium on Growth and Development at the Chinese University of Hong Kong, the Academia Sinica-Center for Chinese Economic Research joint workshop, and the annual meeting of the Society for Economic Dynamics, and seminar participants at Academia Sinica, Chinese University of Hong Kong, National Taiwan University and National Sun Yat-sen University, and Washington University in St. Louis. Travel support from the Chinese University of Hong Kong, Tsinghua University, the Center for Dynamic Economics of Washington University, and the Ministry of Science and Technology of Taiwan are greatly appreciated. We wish to express special thanks to Suqin Ge and Dennis Tao Yang for providing the data on the skill premium in China. Needless to say, the usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Liao thanks the financial support from the Ministry of Science and Technology of Taiwan, project No. MOST 103-2410-H-001-016-MY2.