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Educational choice, rural–urban migration and economic development

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Abstract

We develop an overlapping-generations framework of education-based migration that takes place prior to labor-market participation and explore its role for economic development, urbanization and workforce composition. We show that education-based and work-based migration are substitutes and the equilibrium outcome depends crucially on children’s talent distribution, college costs and selectiveness, urban job opportunities, and migration barriers. We establish conflicting partial- and general-equilibrium effects at work for comparative statics, and examine their locational as well as macroeconomic implications for assessing education and migration policies. Applying our model to fit the data from China over 1980–2007, we find that, although education-based migration only amounts to one-fifth of that of work-based migration, it contributes more to per capita output growth than work-based migration owing to its high-skilled nature. Moreover, the abolishment of education-based migration policy and the relaxation of the work-based migration are found to have limited effects on per capita output and urbanization.

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Authors and Affiliations

  1. Department of Economics, National Taiwan University, Taipei, Taiwan

    Pei-Ju Liao

  2. Department of Economics, Washington University in St. Louis & Federal Reserve Bank of St. Louis and NBER, St. Louis, Cambridge, USA

    Ping Wang

  3. Department of Economics, National Taipei University, New Taipei City, Taiwan

    Yin-Chi Wang

  4. Department of Economics, Chinese University of Hong Kong, Hong Kong SAR, China

    Chong K. Yip

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  1. Pei-Ju Liao
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  2. Ping Wang
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  3. Yin-Chi Wang
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  4. Chong K. Yip
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Correspondence to Yin-Chi Wang.

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We are grateful for comments from Rick Bond, Kaiji Chen, Victor Couture, Suchin Ge, Chang-Tai Hsieh, B. Ravikumar, Ray Riezman, Michael Song and Dennis Yang, two insightful referees, an associate editor, as well as participants at the AREUEA-ASSA Annual Meetings, the Asian Meetings of the Econometric Society, the Asian Bureau of Finance and Economic Research Conference, the Midwest Macro Meetings, the Public Economic Theory Conference, the Society for Advanced Economic Theory Meeting, the Symposium on Growth and Development, the Society for Economic Dynamics Meeting, and the Regional Science Association International Meeting, and seminar participants at Academia Sinica, Chinese University of Hong Kong, National Taiwan University, National Sun Yat-sen University, Washington University in St. Louis and University of Washington-Seattle. Travel support from the Chinese University of Hong Kong, Tsinghua University, and the Center for Dynamic Economics of Washington University are gratefully acknowledged. An earlier draft has been circulated as NBER Working Paper #23939. Liao thanks the research grant from the Ministry of Science and Technology of Taiwan (MOST 103-2410-H-001-016-MY2). Yip acknowledges support received through a GRF grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (No. CUHK 14501618). Needless to say, the usual disclaimer applies.

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Liao, PJ., Wang, P., Wang, YC. et al. Educational choice, rural–urban migration and economic development. Econ Theory 74, 1–67 (2022). https://doi.org/10.1007/s00199-021-01369-2

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