Rural-Urban Migration and Market Integration

Dennis Egger, Benjamin Faber, Ming Li and Wei Lin

No 20521, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We combine a new collection of microdata from China with a natural policy experiment to investigate the extent to which reductions in rural-urban migration barriers affect flows of trade and investments between cities and the countryside. We find that increases in worker eligibility for urban residence registration (Hukou) across origin-destination pairs increase rural-urban exports, imports, capital inflows and outflows, both in terms of bilateral transaction values and the number of unique buyer-seller matches. To quantify the implications at the regional level, we interpret these estimates through the lens of a spatial equilibrium model in which migrants can reduce buyer-seller matching frictions. We find that a 10% increase in a rural county's migration market access on average leads to a 1.5% increase in the county's trade market access and a 2% increase in investment market access. In the context of China's recent Hukou reforms, we find that these knock-on effects on market integration were on average larger among the urban destinations compared to the rural origins, reinforcing incentives for rural-urban migration.

Keywords: Economic development; market integration (search for similar items in EconPapers)
JEL-codes: F63 O12 R11 (search for similar items in EconPapers)
Date: 2025-08
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