Economics

The preference for larger cities in China: Evidence from rural-urban migrants

Document Type

Article

Abstract

China has long aimed to restrict population growth in large cities but encourages growth in small and medium-sized cities. At the same time, various government policies favor large cities. We conjecture that larger cities in China offer a better quality of life and more opportunities. We thus predict that a typical rural-urban migrant is willing to give up some income in order to live in a larger city. We present a simple model in which rural-urban migrants choose destination cities to maximize utilities from consumption and urban amenities. Drawing data from a large-scale population survey conducted in 2005, we first estimate each migrant's expected earnings in each possible destination city using a semi-parametric method to correct for potential selection bias. We then estimate the typical migrant's preference for city population size, instrumenting population size with its lagged values to control for potential omitted-variables bias. From these estimation results, we calculate the typical migrant's willingness to pay to live in larger cities. Our results show that indeed rural-urban migrants strongly prefer cities with larger populations. We explore possible explanations for this preference and discuss the implications of these findings.

Publication Title

China Economic Review

Publication Date

4-2017

Volume

43

First Page

72

Last Page

90

ISSN

1043-951X

DOI

10.1016/j.chieco.2017.01.005

Keywords

China, city size, Hukou system, rural-urban migration, urban amenities

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