Relaxing Hukou:Increased Labor Mobility And China’s Economic Geography

The Chinese Hukou system puts severe restrictions on people’s mobility. It has been argued to be one of the reasons why China is relatively under urbanized considering its level of economic development, as well as why China’s city-size distribution is much more evenly spread than in other countries. In this paper we provide theory-based insights into the question how China’s internal economic geography will be affected by a relaxation of the Hukou restrictions on people’s ability to move between cities.In the first chapter of the paper, namely the introduction part, which introduced the research methods, background, and significance of this paper, and the theoretical basis. Since the founding of China, the Hukou system has always been the basic characteristics of population management. It’s the legal system for China’s national collection of citizen’s basic information.In the early days after foundation, the Hukou system act as an important positive role during the development of China’s economic, political and culture. With frequent communication between urban and rural areas, however, the disadvantages of the Hukou system is also growing, it is not only an unfair grade of citizenship, and played a restricted role in labor flow at the same time. Relaxing the Hukou system is imminent. After this part separately introduced theory knowledge related with the new economic geography, labor mobility and the Hukou system, lay a foundation for later research.The second chapter of this paper mainly considers China’s household registration system from the angle of new economic geography. First of all, introduced in this paper, the research train of thought and the theoretical results expected to reach. In this section, we introduced the research train of thought and the theoretical results expected to reach. China is one of the fastest growing economies in the world. Also, it is home to a huge (potential) internal market and a large number of very large and fast-growing cities. Arguably, China is a textbook case to analyze how agglomerating and spreading forces shape the economic landscape. Recent studies, however, argue that Chinese cities are still undersized due to the severe restrictions on labor mobility that are imposed through the so called Hukou system. Compared to other countries in the world at a similar stage of economic development, China has a much more evenly sized city size distribution, which arguably keeps it from reaping the full benefits of agglomeration.China’s household registration system of labor mobility has played a restricted role, this paper assesses the possible consequences of relaxing these restrictions for China’s internal economic geography. We base our analysis on a new economic geography (NEG) model. In chapter3to4, first, we estimate the important model parameters using data on264of China’s prefecture cities. Our264prefecture cities cover86%of total population in China and96%of total GDP. Second, we use these estimates as inputs in the full NEG model under different labor mobility regimes. We find that increased labor mobility leads to more pronounced core-periphery outcomes. Beijing, Shanghai, Guangzhou and Chongqing in particular will further strengthen their dominant place in China’s urban hierarchy. In addition, two other groups of cities can be distinguished:those in China’s populous heartland offering preferential access to China’s enormous internal market, and more peripheral cities that are better shielded from competition with China’s economic heartland by virtue of their relative remoteness.