I find the human capital decreased sharply, as measured by high school enrollment and dropout rates, when the mobility restriction is removed. This finding indicates considerable indirect returns to education stemming from the Hukou system in the presence of education-based selective migration, over and above the usual direct pecuniary returns. These results reveal the important role of the Hukou system on encouraging educational investment in China.
We find that increased labor mobility will lead to more pronounced core-periphery outcomes. Interestingly, these agglomerations are not necessarily along the coastal regions. Given the increased importance of China’s internal market, firms agglomerate in the populous heartland of China. China’s internal demand will be the most important determinant of its future economic geography.
Labor Mobility: Implications for Asset Pricing, Andres Donagelo
I construct an empirical measure of labor mobility consistent with the model and document an economically signiﬁcant cross-sectional relation between labor mobility, operating leverage, and expected returns. I ﬁnd that ﬁrms in highly mobile industries earn returns 5.3% higher than those in less mobile industries.