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Title: Urbanisation and Migration Externalities in China

Author(s): Pierre-Philippe Combes, Sylvie Démurger and Shi Li

Publication Date: February 2013

Keyword(s): agglomeration economies, China, migration, urban development and wage disparities

Programme Area(s): Development Economics and International Trade and Regional Economics

Abstract: We evaluate the role that cities play on individual productivity in China. First, we show that location explains a large share of nominal wage disparities. Second, even after controlling for individual and firms characteristics and instrumenting city characteristics, the estimated elasticity of wage with respect to employment density is about three times larger than in Western countries. Land area and industrial specialisation also play a significant role whereas the access to external markets does not. Therefore, large agglomeration economies prevail in China and they are more localised than in Western countries. Third, we find evidence of a large positive impact of the local share of migrants on local workers' wages. Overall, these results strongly support the productivity gains that can be expected from further migration and urbanisation in China.

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Bibliographic Reference

Combes, P, Démurger, S and Li, S. 2013. 'Urbanisation and Migration Externalities in China'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9352