Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?
Transcript of Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?
![Page 1: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/1.jpg)
Learning in Chinese Cities: Do Rural Migrants Benefit from
Labor Market Agglomeration Economies?
Shihe Fu
Fulbright Visiting Scholar at CRE, MITSouthwestern University of Finance and
Economics
STL China Talk Series October 17 2016
![Page 2: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/2.jpg)
2
Outline
Background: Why do cities exist • business agglomeration economies• labor market agglomeration
economies Research questions and motivation Data and methodology Results Policy implications and future research
![Page 3: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/3.jpg)
3
Why Do Cities Exist? An Economics Approach
Cities are areas with high-density population (or concentration of people and firms in limited geographic areas) The benefits of such concentration are called agglomeration economies The reason why cities exist
![Page 4: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/4.jpg)
4
Firm Side: Business agglomeration economies
Localization Economies: the benefit from the concentration of same-industry firms in a city
• Silicon Valley, Route 128, Detroit Urbanization Economies: the benefit from the concentration of different-industry firms in a city
• New York CityHoover (1937) (Location Theory and the Shoe and Leather Industries)
![Page 5: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/5.jpg)
5
Micro-foundations of Localization Economies
Sharing• sharing inputs: highways, public utility,
airport Pooling
• concentration of firms and workers facilitates matching and reduces search costs
Learning • information or knowledge spillovers
Specialization; Competition
![Page 6: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/6.jpg)
6
Dynamic Localization Economies
Industries with strong localization economies tend to grow fast (Marshall, 1920)
In the dynamic context, localization economies is dubbed Marshallian externalities
• Marshallian-Arrow-Romer (MAR) externalities (Glaeser et al., 1992) (Growth in cities, JPE)
![Page 7: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/7.jpg)
7
Urbanization Economies Benefits from the general level of city economy. Measured by city size (population). (Hoover, 1937, 1971) , Henderson (1986) Benefits from overall local urban scale and diversity (Henderson et al., 1995) Benefits from industrial diversity In dynamic context: Jacobs externalities,
• Glaeser et al. (1992)• Jacobs (1961,1969): The Death and Life
of Great American Cities
![Page 8: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/8.jpg)
8
Micro-foundations of Urbanization Economies
Sharing Pooling Learning
• Jacobs: Cross-industry fertilization promotes innovation and urban growth
Economies of scope
![Page 9: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/9.jpg)
Worker Side: Labor Market Agglomeration Economies
Benefit from the concentration of employment Labor market localization economies:
• Benefits from concentration of workers in the same industry (occupation) in a city.
• In dynamic context, Marshallian externalities in labor markets
Labor market urbanization economies: • Benefits from concentration of workers in
different industries (occupations) in a city.
• In dynamic context, Jacobs externalities in labor markets.
![Page 10: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/10.jpg)
Urban Wage Premium Labor market agglomeration economies can improve workers’ matching and learning, therefore help enhance skills and accumulate human capital
Workers’ productivity will be higher in larger cities
Wages will be higher in larger cities: urban wage premium
![Page 11: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/11.jpg)
Micro-foundations of Labor Market Agglomeration
Economies Labor market pooling:
• Improve matching between workers and firms; reduce search friction; increase labor mobility
Knowledge spillovers (human capital externalities) through social interactions
• Formal communications (Charlot and Duranton, 2004)
• Informal social interaction (social networking)
• Poaching• Peer effect
![Page 12: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/12.jpg)
When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another…if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas. And presently subsidiary trades grow up in the neighbourhood, supplying it with implements and materials, organizing its traffic, and in many ways conducing to the economy of its material.
Marshall (1920): Principles of Economics, Book IV, Chapter 10 The Concentration of Specialized Industries in Particular Localities
![Page 13: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/13.jpg)
13
Most of what we know we learn from other people. We pay tuition to a few of these teachers, either directly or indirectly by accepting lower pay so we can hand around them, but most of it we get for free, and often in ways that are mutual - without a distinction between student and teacher. … We know this kind of external effect is common to all the arts and sciences - the 'creative professions'. All of intellectual history is the history of such effects. But, as Jacobs has rightly emphasized and illustrated with hundreds of concrete examples, much of economic life is 'creative' in much the same way as is 'art' and 'science‘…What can people be paying Manhattan or downtown Chicago rents for, if not for being near other people? Lucas (1988): On the mechanism of economic development
![Page 14: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/14.jpg)
Empirical Evidence for Labor Market Agglomeration Economies Extensive empirical evidence on urban wage premium: Glaeser and Mare (2001), Moretti (2004), Rosenthal and Strange (2006) mostly from developed countries mostly on effect of city size (urbanization economies) mostly on urban workers Testing whether cities make workers more productive or productive workers move to cities
![Page 15: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/15.jpg)
Research Questions
Do Marshallian externalities exist in Chinese cities?
And if so, how large is the magnitude?
Do rural migrants benefit from urban labor market agglomeration?
![Page 16: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/16.jpg)
Research Motivation Massive rural-urban migration of low-skilled workers. Regulations on urban growth: institutional barriers preventing free migration (hukou system); cities are relatively small (Au and Henderson, 2005) Global competition; manufacturing industry upgrading City growth and human capital (Glaeser and Saiz, 2004) How to make Chinese cities become skilled?
![Page 17: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/17.jpg)
Why Focus on Labor Market Marshallian Externalities?
Mitigate the problem “productive workers select into cities” Agglomeration economies are very localized—decaying with distance Very limited empirical evidence so far
![Page 18: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/18.jpg)
Main Findings There exist Marshallian externalities in the urban labor market in China Rural migrants also benefit from Marshallian externalities, but benefit much less than do local workers, urban workers, or local workers with an urban hukou “Double discrimination” (based on hukou and migration status)
![Page 19: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/19.jpg)
Data 2004 Manufacturing Census data: total employment in each firm, by education 2005 inter-census population survey (one-fourth of the 1% sample) Merge by city-industry link (two-digit industries) (Moretti, 2004)
![Page 20: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/20.jpg)
Key Variables of Agglomeration
log(Emp): total employment in a city-industry, measuring labor market pooling effect CollegeShare: number of workers with a college degree or above in a city-industry cell divided by total employment in that city-industry cell (human capital externality)
![Page 21: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/21.jpg)
Model
effect fixedindustry :effect fixedcity :
city in industry in share college :
city in industry in employment total:..)education. age, (gender, attributes individual :
city in industry in worker of wage:
)log(log
3
21
j
k
jk
jk
i
ijk
ijkjk
jkijkijk
kj reCollegeSha
kjEmpX
kjiW
reCollegeSha
EmpXW
![Page 22: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/22.jpg)
Causal Identification Two observationally identical workers (A
and B) working in the same industry in two identical cities (CA and CB), the only difference is that in one city (CA) there are more workers and more highly-educated workers in that industry, does this increase worker A’s wage?
How to make two workers observationally identical? Include many observed worker characteristics: gender, age, marital status, education, hukou status, migration year, type of employers, type of labor contract, industry, occupation
![Page 23: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/23.jpg)
Existence of labor market agglomeration economies baseline industry occupation occuinduUrbanhukou 0.0297*** 0.0375*** 0.0166*** 0.0217***
2.51 3.49 2.20 2.93Highschool 0.1330*** 0.1322*** 0.1008*** 0.1004***
23.57 22.47 26.64 26.91Associate 0.4284*** 0.4250*** 0.3226*** 0.3200***
31.01 31.02 33.12 33.56College 0.7560*** 0.7522*** 0.6032*** 0.6005***
26.67 26.81 28.84 29.53Masterabove 1.3198*** 1.3097*** 1.1195*** 1.1132***
29.55 29.48 31.21 31.45log(Emp) 0.0052* 0.0015 0.0019 0.0029
1.72 0.36 0.66 0.74CollegeShare 0.5044*** 0.3431*** 0.4621*** 0.3598***
9.97 5.36 10.03 6.10R2 0.39 0.40 0.43 0.44sample size 172,002
![Page 24: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/24.jpg)
Weak evidence from labor market pooling Subsamples: sorting bias not serious Significant human capital externalities (0.2-0.4 in USA)
Robustness check occuindu local migrants <=2.5year >2.5year <=33 >33Log(Emp) 0.0029 0.0111** 0.0015 -0.0018 0.0147*** 0.0018 0.0071
0.74 1.91 0.47 -0.51 3.40 0.50 1.49CollegeShare 0.3598*** 0.3473*** 0.2812*** 0.2285*** 0.3454*** 0.3228*** 0.3847***
6.10 5.06 3.87 3.05 3.22 5.26 5.63
R2 0.44 0.44 0.43 0.39 0.46 0.44 0.45obs. 172002 97478 74524 34975 39549 91426 80576
![Page 25: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/25.jpg)
Rural migrants benefit from Marshallian externalities baseline
Migrant year<=2.5
Migrant year>2.5 Age<=26 Age>26
Log(Emp) 0.0123*** 0.0128** 0.0115*** 0.0181*** 0.0104***
2.70 2.20 2.26 3.02 2.19CollegeShare 0.2095** 0.3551*** 0.1119 0.2209* 0.2381**
1.93 2.64 0.93 1.67 2.07
R2 0.30 0.25 0.33 0.26 0.35obs. 49916 23302 26614 25260 24656
![Page 26: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/26.jpg)
Rural migrants benefit less from agglomeration economies
1 2 3 4 5 6 7 full
sampleRural
migrantsUrban hukou
Local hukou
Local urban
Urban migrants All
Log(Emp) 0.003 0.012*** 0.018*** 0.011** 0.020*** 0.018** 0.012**log(Emp) *Migrant*Urban
0.009**
log(Emp) * Local *Rural
-0.014***
log(Emp) *Rural *Migrant
-0.024***
CollegeShare 0.360*** 0.210** 0.348*** 0.347*** 0.329*** 0.513*** 0.554***CollegeShare*Migrant*Urban
0.037
CollegeShare*Local*Rural
-0.615***
CollegeShare*Rural* Migrant
-0.588***
![Page 27: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/27.jpg)
Possible Interpretation
Work in informal job sectors that have fewer spillovers?
Low-skilled, low absorptive capacity? (education categories)
Rural migrants lack of social network? (information asymmetry)
Discrimination?
![Page 28: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/28.jpg)
High-skilled workers benefit less if they are rural1 2 3 4 5 6
Low skilled
High skilled
Low skilled
U/R
High skilled U/R
Low skilled L/M
High skilled L/M
Log(Emp) 0.003 0.014** 0.010* 0.017*** 0.005 0.017**
Log(Emp)*Rural -0.013*** -0.038**Log(Emp)*Migrant -0.009** -0.010
CollegeShare 0.311*** 0.504*** 0.537*** 0.517*** 0.322*** 0.499***CollegeShare* Rural -0.556*** -0.577***CollegeShare*Migrant -0.074 0.035
![Page 29: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/29.jpg)
Low / high-skilled worker sampleFull sample Low-skilled High-skilled
Log(Emp) 0.012* 0.008 0.018***
Log(Emp)*urban*migrant 0.009** 0.002 -0.004Log(Emp)*local*rural -0.014*** -0.007* -0.019Log(Emp)*rural*migrant -0.024*** -0.014** -0.046***
CollegeShare 0.554*** 0.538*** 0.509***
CollegeShare*urban*migrant 0.037 -0.093 0.053CollegeShare*local*rural -0.615*** -0.580*** -0.584**
CollegeShare*rural*migrant
-0.588*** -0.500*** -0.503(-1.49)
There may exist two types of discrimination: local bias and urban bias
![Page 30: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/30.jpg)
Other Studies Suggest Double Discrimination
Zax (2016): returns to education vary significantly and persistently across provinces and years, suggesting mobility barriers across provinces
Chen et al. (2015): rural migrants are more likely to search jobs through informal social network but receive lower wages if they do so.
![Page 31: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/31.jpg)
Other Studies Suggest Double Discrimination
Liu et al. (2016): rural migrants are residentially segregated in Shanghai, based on Census 2010
![Page 32: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/32.jpg)
(.9,1](.8,.9](.65,.8](.5,.65](.4,.5][0,.4]
Local Ratio in Shanghai(2010)(0.750,1.000](0.550,0.750](0.350,0.550](0.250,0.350](0.200,0.250][0.000,0.200]
Migrant Ratio in Shanghai(2010)
![Page 33: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/33.jpg)
![Page 34: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/34.jpg)
Conclusion
Labor market agglomeration economies exist in Chinese cities
Rural migrants benefit from labor market agglomeration economies, but benefit much less than do local, urban residents
Double discrimination towards rural migrants
![Page 35: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/35.jpg)
Implications What drives rural-urban migration
and urbanization? Cities facilitate learning
Learning in cities through social interactions, alternative to school education
Barriers to learning
![Page 36: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/36.jpg)
How Can Chinese Cities Attract Skilled People?
Make cities safe Make cities clean: air quality Make cities accessible: public transit,
walkable streets Make cities livable: affordable housing,
open space… Make cities open, tolerant: remove
mobility barriersFortunately, China is reforming the hukou system.
![Page 37: Learning in Chinese Cities: Do Rural Migrants Benefit from Labor Market Agglomeration Economies?](https://reader034.fdocuments.us/reader034/viewer/2022042723/588054521a28ab22088b6469/html5/thumbnails/37.jpg)
Future Research Identify how people socially interact
in cities Test how relaxing or removing mobility
barriers enhances social interactions Urban public policies that promote
social interactions and learning in cities