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Migration and Spatial Misallocation in China

Xiaolu Li (), Lin Ma and Yang Tang ()
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Xiaolu Li: Nanjing University of Posts and Telecommunications
Yang Tang: Nanyang Technological University

No 9-2021, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: We structurally estimate the firm-level frictions across prefectures in China and quantify their aggregate and distributional implications. Based on a general equi-librium model with input and output distortions and migration, we show that the firm-level frictions are less dispersed and less correlated with productivity in richer prefectures. Counterfactual exercises show that reducing the within-prefecture mis-allocation increases the aggregate welfare, discourages migration towards large cities, and narrows the spatial inequality. Moreover, internal migration alleviates the impacts of micro-frictions on aggregate welfare and worsens their impacts on spatial inequality.

Keywords: misallocation; regional trade; economic geography; welfare gain (search for similar items in EconPapers)
JEL-codes: F12 O11 R12 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2021-09-01
New Economics Papers: this item is included in nep-cna, nep-geo, nep-int, nep-mig, nep-sea and nep-ure
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:smuesw:2021_009

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