Human capital agglomeration, institutional barriers, and internal migration in China

Abstract

Abstract This paper investigates how human capital agglomeration interplays with institutional factors to affect migration destination choice in China. Over the last decades, China has experienced massive internal migration, substantial human capital investment, and the relaxation of its hukou system, thus providing us with a valuable opportunity to examine the role of human capital externality in migration choice. Based on rich data on province‐to‐province migration flows for different education and hukou groups, we find that migrants in China, especially highly educated and urban‐to‐urban migrants, have a strong preference to move to provinces with a high agglomeration of human capital. Further examination reveals that low‐skilled migrants in China are less likely to benefit from human capital agglomeration because of their lower ability to overcome hukou restrictions. Our findings raise the concern that labor migration under the skill‐biased hukou system would enlarge China's regional disparities in human capital and economic development.