Human Capital and Migration : a Cautionary Tale

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Article number105720
Journal / PublicationJournal of Econometrics
Volume243
Issue number1-2
Online published11 Mar 2024
Publication statusPublished - Jul 2024

Abstract

We analyze the impact that the option of migration might have on human capital accumulation. We show that, when the return to education for migrants is lower in the destination than in the origin, the overall incentive to accumulate human capital is reduced as restrictions on migration are relaxed. We use panel data from the Chinese Household Income Project to document that the return to education for rural individuals is lower in urban areas than in rural areas. We then use a difference-in-differences design to show that the 1983 reform that eliminated the strong restriction that existed for rural–urban migration resulted in a reduction of 0.4 years of schooling for rural people in China. Guided by these results, we estimate a life-cycle dynamic discrete choice model of education decisions and circular rural–urban migration in which individuals differ in observable characteristics and unobservable cognitive and non-cognitive skills. We validate the model by showing it is able to replicate the impact estimates from the difference-in-differences specification. Our simulations show that, while it would take a small subsidy (conditional on staying in school) to undo about 40% of the negative effects of the 1983 policy on rural education, the annual subsidy would need to be half of annual earnings to undo the effects entirely. © 2024 Published by Elsevier B.V.

Research Area(s)

  • Internal migration, Human capital, Education

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Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

Human Capital and Migration: a Cautionary Tale. / Navarro, Salvador; Zhou, Jin.
In: Journal of Econometrics, Vol. 243, No. 1-2, 105720, 07.2024.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review