Hukou and Highways: The Impact of China?S Spatial Development Policies on Urbanization and Regional Inequality

41 Pages Posted: 20 Apr 2016

See all articles by Erik Maarten Bosker

Erik Maarten Bosker

University of Groningen; Erasmus University Rotterdam (EUR) - Department of Economics

Uwe Deichmann

World Bank - Development Research Group (DECRG)

Mark Roberts

World Bank

Date Written: June 30, 2015

Abstract

China has used two main spatial policies to shape its geographic patterns of development: restricted labor mobility through the Hukou residential registration system and massive infrastructure investment, notably a 96,000 kilometer national expressway network. This paper develops a structural new economic geography model to examine the impacts of these policies. Fitting the model to available data allows simulating counterfactual scenarios comparing each policy?s respective impact on regional economic development and urbanization patterns across China. The results suggest large overall economic benefits from constructing the national expressway network and abolishing the Hukou system. Yet, the spatial impacts of the two policies are very different. The construction of the national expressway network reinforced existing urbanization patterns. The initially lagging regions not connected to the network have not benefitted much from its construction. By contrast, removal of the Hukou restrictions, which Chinese policy makers are considering, would result in much more widespread welfare gains, allowing everyone to gain by moving to where he or she is most productive. Removal of the Hukou restrictions would also promote urbanization in currently lagging (inland) regions, mostly by stimulating rural to urban migration.

Keywords: City to City Alliances, Urban Communities, Industrial Economics, Economic Theory & Research, Urban Economics, Economic Growth, National Urban Development Policies & Strategies, Regional Urban Development, Urban Economic Development

Suggested Citation

Bosker, Erik Maarten and Deichmann, Uwe and Roberts, Mark, Hukou and Highways: The Impact of China?S Spatial Development Policies on Urbanization and Regional Inequality (June 30, 2015). World Bank Policy Research Working Paper No. 7350, Available at SSRN: https://ssrn.com/abstract=2625338

Erik Maarten Bosker (Contact Author)

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

Erasmus University Rotterdam (EUR) - Department of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Uwe Deichmann

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Mark Roberts

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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