1、Human capital externalities and ruralurban migration: Evidence fromexerts positive external effects on the likelihood for a rural resident to choose off-farmprodhelpsof urbaninmodel, urbanjobcreationprogramsareineffectiveinsolvingtheunemploymentproblembecausetheyraisetheexpectedpayoffsChina Economic
2、 Review 19 (2008) 521535Contents lists available at ScienceDirectChina Economic Reviewto rural migrants and, as a result, lead to a higher, rather than lower, level of urban unemployment.2One solution is to controlruralurban migration through administrative means. A policy tool that China relied upo
3、n is the hukou or household registrationsystem coupled with a ration system on staple food in urban areas. Although that policy has successfully warded off unplannedmigrations, it has been criticized as an unfair development policy that promotes industrial growth at the expense of theagricultural se
4、ctor and urban development at the expense of the rural sector. It also is contrary to the principle of economicefciency that requires the free movement of human resources across different regions and sectors. From a rural developmentlarge extent, the widespread problemof state-owned enterprises have
5、 resulted1An earlier version of the paper was presented at theEquity and Institutions” held in Shanghai, China, Julydisclaimer applies.E-mail address: zqliubuffalo.edu.1See, Todaro (1969) and Harris and Todaro (1970)employment prospects in the urban sector. He emphasizesproduction technologies, whic
6、h raise the life-time earnings2Rural migrants are also blamed for being a strain onother social problems in urban areas.1043-951X/$ see front matter 2008 Elsevier Inc.doi:10.1016/j.chieco.2008.04.001unemployment in developing countries. This is especially true in China, as reformsmassive layoffs of
7、redundant workers in the city. According to the basic HarrisTodaroagricultural sector where the marginallabor is high. While ruralurban migrationemployment and on labor income in the rural sector. These results are robust to alternativemodel specications and estimation methods. One important policy
8、implication from thisstudy is that expanding education opportunities in rural areas can help curtail ruralurbanmigration and therefore alleviate urban unemployment pressure. 2008 Elsevier Inc. All rights reserved.part of economic development, through which human resources move from theuct of labor i
9、s low or zero tothe urban industrial sector where the marginal product ofimprove the efciency of sectoral allocation of resources, it also exacerbates, to aJEL classication:J24O15O181. IntroductionRuralurban migration is an essentialrural ChinaZhiqiang LIUDepartment of Economics, State University of
10、 New York at Buffalo, Buffalo, NY 14260, United Statesarticle info abstractArticle history:Accepted 10 April 2008This study examines the determinants of ruralurban migrationpaying special attention to therole of human capital externalities in the rural sector. Using data from awell-known householdsu
11、rvey in China, we nd that in rural areas human capital externalities have a discouragingeffectonruralurban migrationeverythingelsebeing the same, aruralresidentfromacountyrich in human capital is less likely to migrate to the city than his counterpart from anothercounty poor in human capital endowme
12、nt. We also nd some evidence that human capitalKeywords:Ruralurban migrationHuman capital externalitiesRural developmentChinese Economists Societys International Conference on “Governing Rapid Growth in China: Efciency,24, 2006. I thank Belton Fleisher and two anonymous referees for comments and sug
13、gestions. The usual. Lucas (2004) offers an alternative explanation on why ruralurban migration persists despite of poorthe role of cities as places in which new migrants can accumulate the skills required by modernof migrants.urban infrastructures, such as transportation, healthcare and education s
14、ystems, and for rising crimes andAll rights reserved.perspective,ruralurbanmigrationmaybeharmfulbecauseitdepletestheruralsectorofvaluablehumancapitalastheyoungandbetter-educatedruralresidentsareamongthersttomigratetothecity.3Thereisaneedtoidentifyruralurbanmigrationpoliciesthat can strike a balance
15、among three objectives: efciency, urban unemployment, and rural development.A substantial amount of research has been devoted to the understanding of the determinants of the migration decision.4Lall,Selod, and Shalizi (2006) contains a comprehensive survey of the empirical literature, which nds that
16、 ruralurban income gaps,522 Z. Liu / China Economic Review 19 (2008) 521535education, gender, family composition are among the factors that affect the migration decision in the way predicted by varioustheories of migration. Numerous studies examining the Chinese experience also offer corroborating e
17、vidence. Notable studiesinclude, amongothers, Zhao (1999a,b), Hare(1999), De Brauw, Huang, Rozelle, Zhang, and Zhang(2002), and Giles and Mu (2005).The present study makes a contribution to the vast literature on ruralurban migration. Our approach differs from the existingliterature by focusing on h
18、uman capital externalities in the rural sector. This allows us to gain new insights into the general role ofhumancapitalininuencingthemigrationdecisionandtoderivepolicyrecommendationsthathelpcurtailruralurbanmigrationand hence alleviate urban unemployment pressure.We argue that human capital at the
19、aggregate level can act as an inhibitor to migration. The economic intuition isstraightforward. The migration decision of an individual is made by weighing the expected income or utility of migration againstthat of no migration. Migration occurs when the net gain is positive, and any factor that red
20、uces this net gain would have adissuading effect on migration on the margin. Our argument is that if human capital can raise, through its external effect, thepayoffs from rural activities, an increase in the overall level of educational attainment of the rural population would make stayingin the rur
21、al sector a more attractive choice (at least for some potential migrants) relative to migrating to the city. This would beparticularly true if there are plenty of local off-farm employment opportunities, in which human capital externalities are moreimportant than in on-farm productions. Thus, higher
22、 local human capital endowment would make migration a less attractiveoption relative to staying in the rural sector, and on-farm activities less attractive than local off-farm employment.The main nding of the paper, based on an econometric analysis of a well-known household survey in China, is that
23、in ruralareas human capital externalities have a discouraging effect on ruralurban migration. That is, everything else being the same, aruralresidentfromacountyrichinhumancapitalislesslikelytomigratetothecitythanhiscounterpartfromanothercountypoorin human capital endowment. This result is obtained f
24、rom both binomial and multinomial logit regression analyses. While in theformer rural residentsareassumedto choose between migratingtothe cityand staying inthe rural sector, in the multinomial logitmodel theyare faced with three employment choices: migrate to and work in the city, work in the rural
25、off-farm sector, and workin the rural on-farm sector. The multinomial logit regressions also suggest that human capital exerts a positive external effect onthe likelihood for a rural resident to choose local off-farm employment. Corroborating with this result, we nd a positiverelationship between la
26、bor income in the rural sector and local human capital endowment. All of these results are robust toalternative model specications and estimation methods. One important policy implication of our ndings is that expandingeducation opportunities in rural areas can be a viable strategy to curtail ruralu
27、rban migration and hence help alleviate urbanunemployment pressurequite contrary to the inference drawn by some previous studies that improving education of the ruralpopulationwould hasten ruralurban migration. This policy recommendation accords well with Chinas ofcial policy as reectedin the motto
28、“leaving the farmland without leaving the village.”Therestof thepaperisorganizedasfollows.WebrieydiscussthedatainSection2andeconometricmethodologyinSection3.Section 4 presents the estimation results. We offer some concluding remarks in the last section.2. DataThe data used in this studycome from the
29、 Chinese Household Income Project 1995, also known as CHIP95. The surveycontainstwo distinct samples of the urban and rural populations of China selected from substantiallylarger samples drawn bythe NationalBureau of Statisticsof Chinaand covercities and townsof varioussizes from different regions.I
30、n the rural sample,whichwe use inthis study, eighteen provinces and one municipality were chosen to represent the whole country. These are Liaoning, Hebei, Jilin,and Shanxi in the north, Shandong, Jiangsu, Zhejiang, and Guangdong as eastern coastal provinces, Anhui, Henan, Hubei, andHunanfrom theint
31、erior, Gansu,Shananxi,Sichuan,Guizhou,Jiangxi,and Yunaninthewest, andBeijingas a representative of thenthreelargeprovince-levelmunicipalities.Theruralsampleconsistsof twoparts.Therstcontainsinformationontherespondentsage, gender, education, employment status, ownership sector of employment, economic
32、 sector of employment, and annual laborincome.Italsocontainsinformationonwhetheranindividualwenttoworkorlookforworkinthecity.Thesecondpartof theruralsample contains information on household characteristics, such as landholdings, household composition, incomes, expenditures,and assets. It also contai
33、ns some information about the village that the household resides, such as whether the village is located inthe suburb of a large- or medium-sizecity, the type of terrain and availabilityof telephone services. In this study, we focus on ruralindividuals who were between 16 and 60 years of age and rep
34、orted complete information on schooling, age, gender, andemployment. Full-time students, pre-school children, and individuals who were retired or disabled are excluded from the sample.This results in a sample of 21,451 individuals.3It is conceivable that ruralurban migration may benet rural developm
35、ent if migration becomes a source of remittances to rural areas, especially if theremittance is used in education and productive investments.4There are several comprehensive reviews of the theoretical literature. See, e.g., Hare (1999) and Lall et al. (2006). To avoid unnecessary repetition, we do n
36、otattempt to provide one of our own in this paper.Table 1 presents denitions and summary statistics of the variables used. We classify the sample individuals into three groups:migrants,localoff-farmworkers,andlocalon-farmworkers.Migrantsareidentiedaspeoplewholefttheirhouseholdsforatleastone month to
37、 work or to look for work in the city. They consist of about 6.5% of our sample individuals. Local off-farm workers,accounting for about 18% of the sample, are those who engaged primarily in local off-farm activities. Local on-farm workers arethose who engaged mainly in on-farm activities, represent
38、ing over 75% of the sample individuals. Many of non-migrant workersearned labor incomewhich includes regular wage, bonuses, subsidies, and non-regular income (such as contract income and salescommission) from work unit, income from other sources, such as the market value of income in kind received f
39、rom the work unitand income and subsidies received for serving as village cadre. Pension and unemployment benets are excluded. Labor incomevaries widely across individuals partly because of large variations in the number of days allocated to non-household businessrelated activities. Those who receiv
40、ed labor income devoted an average of 35.5 days during the sample year to working outsidetheir households, with a standard deviation of 84 days.Measuring local human capital endowment is of central importance to our empirical investigation and, therefore, warrants abrief discussion. We measure the l
41、evel of local human capital for each county in two ways. The rst, denoted by Cedyr, is theaverage schooling in years of the sample individuals in a county. This measure is similar to the ones adopted by Rauch (1993) andAcemoglu and Angrist (2000) who estimate human capital externalities in U.S. citi
42、es and states, respectively, and Liu (2007) whoestimates the external returns to education in Chinese cities. The second measure, denoted by Colsh, is the share of collegegraduates among the sample individuals in a county. This measure is similar to the one adopted by Moretti (2004) and Liu (2007).C
43、edyrandColshmaycapturedifferentmechanismsthroughwhichhumancapitalgeneratesexternaleffects.AsCedyristhesimpleaverage of educational attainment of individuals in a local area, it indicates the general availability of a productive labor force,which is more important for off-farm than for on-farm activi
44、ties. By contrast, Colsh indicates the availability and relative size of awell-educated, elite group. College-educated workers can help raise others productivity due to the existence of a complementaryTable 1Denition of variables and summary statisticsDenition Mean (standard deviation)Key dependent
45、variablesMigrant =1 if left the household for at least a month to work or look for work in cities, =0 for all others 0.065 (0.246)Local off-farm worker =1 if engaged primarily in local non-farming activities, =0 for all others 0.178 (0.383)Local farm worker =1 if engaged primarily in farming activit
46、ies, =0 for all others 0.757 (0.429)Local labor income Total annual labor income, excluding pension and unemployment benets (yuan) 4007 (7572)Individual characteristicsCollege =1 for college graduates, =0 for all others 0.00531 (0.0727)Vocation school =1 for vocational school graduates, =0 for all o
47、thers 0.0116 (0.107)High school =1 for high school graduates, =0 for all others 0.0863 (0.281)Middle school =1 for middle school graduates, =0 for all others 0.417 (0.493)Primary school =1 for primary school graduates, =0 for all others 0.311 (0.463)Age Age in years 35.73 (11.843)Male =1 for males,
48、=0 for females 0.502 (0.500)523Z. Liu / China Economic Review 19 (2008) 521535Married =1 for married people, =0 for all others 0.767 (0.423)Workdays Number of days allocated to non-household business related activities 35.5 (83.712)Family characteristicsFamily size Number of household members 4.35 (
49、1.374)Family labor force Number of household members in the labor force 3.17 (1.236)Pre-school children Number of pre-school children in the household 0.28 (0.550)Disable persons Number of disabled persons in the household 0.063 (0.271)Landholdings Land under the household control (mu) 7.99 (6.552)Family wealth Total value of all nancial asset at the end of 1995 (10,000 yuan) 4885 (9136)Community characteristicsCedyr Average level of education in years in a county based on the sample 6.01 (1.036)Colsh College graduates as a share o
