Unequal Productivity Gains in Urban China

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Abstract

Speaker: Professor Sylvie Démurger (CNRS, GATE-LSE)

We estimate urbanisation effects in China for various groups of workers identified by their skill level and Hukou (migration) status.

Considering both city and city-industry characteristics allows us to better disentangle agglomeration economies, human capital and migrant externalities, and substitution effects within the local production function. Location matters for Chinese workers' earnings. High-skilled urban workers experience large gains due to agglomeration effects, a strong rural migrant externality at the city level and a smaller human capital externality at the city-industry level. Low-skilled urban workers also benefit from agglomeration effects and from the presence of migrants but to a lower extent.

Rural migrants are less impacted and do not gain from agglomeration except through market access. They exert a negative impact on the already set up migrants' earnings at the city-industry level. But they benefit from a human capital externality at both the city and city-industry levels, and from a migrant externality at the city level.