Migration, Urbanisation, and Structural Transformation: Evidence from China
Draft Coming Soon
Abstract: How does internal migration affects structural transformation? This paper investigates the impact of a large-scale policy reform aimed at promoting migration and urbanisation in China. The 2014 reform on the household registration (Hukou) system significantly eased settlement restrictions in small and medium-sized cities, defined by their urban population size. Using a newly-collected dataset on Hukou documents, the analysis shows that medium-sized cities with urban populations just below one-million threshold experienced significantly greater policy relaxation, compared to the large cities just above the threshold. Employing a difference-in-differences and event study approach for cities near the threshold, the paper finds that cities just below the cut-off experienced 9.9% faster urban population growth between 2015 and 2020 compared to those just above. The reform also led to substantial increases in GDP and manufacturing output, as well as a rise in firm growth and formation in the non-agricultural sector. Overall, these findings provide robust causal evidence on the role of reducing rural-to-urban migration barriers in accelerating urbanisation and structural transformation in developing economies.
Abstract: This paper exploits China's accession to the WTO to investigate the impact of a supply shock on quality across the Indian production network. After controlling for increased import competition, including in downstream and third-country markets, and for new export opportunities, we find that a fall in input tariffs raises revenue, quality and prices, whilst lowering quality-adjusted prices and the probability of product exit – consistent with a simple model of multi-product manufacturers gaining access to higher-quality components. Upgrading persists for at least ten years; at the peak in 2010, products with a 10% higher pre-accession input tariff, and hence a larger post-accession fall in tariffs, have 5.3% higher quality. This in turn raises quality further down the supply chain, with input-output linkages amplifying the one-step effect by up to 75%. These results highlight a potential beneficial impact of the “China shock” in developing countries, namely supply-driven quality upgrading.
October 2023, China Economic Review
Urbanisation, Labour market, and Economic Growth
with Yongjun Chen
Abstract: The urban development process in many developing countries reveals that urbanization, structural transformation, and economic growth are not always synchronized. This paper systematically reviews recent international research on urbanization, exploring the complex interplay between urbanization, industrial restructuring, labor market development, and economic growth. Urbanization's primary feature and strength lie in the agglomeration effect driven by population mobility, while economic growth hinges on increasing productivity. A key mechanism by which urbanization fosters long-term economic growth is through facilitating labor market concentration and mobility. This paper examines the relationship between urbanization and labor market dynamics, particularly the spatial, inter-sectoral, and intra-sectoral barriers to mobility that arise during the urbanization process. Based on these findings, the paper offers three targeted policy recommendations: (1) To enhance overall factor mobility, infrastructure development should be strengthened, migration and commuting costs reduced, and accessible urban environments created; (2) To improve job matching efficiency, employment information systems should be streamlined, with focused support for key demographic groups; and (3) To bolster labor market resilience, unemployment protection should be enhanced, and labor market policies refined to align with broader macroeconomic development needs.
June 2024 , Social Science International (Chinese)
The Joint Effect of Emigration and Remittances on Economic Growth and Labor Force Participation in Latin America and the Caribbean
with Alina Carare, Alejandro Fiorito Baratas, Jessie Kilembe, and Metodij Hadzi-Vaskov
Abstract: We provide a consistent empirical framework to estimate the net joint effect of emigration and remittances on the migrants’ countries of origin key economic variables (GDP growth and labor force participation), while addressing the endogeneity concerns using novel “shift-share” instrumental variables in the spirit of Anelli and others (2023). Understanding this joint impact is crucial for the Latin America and the Caribbean region that has seen a continuous growth in remittances over the past decades, due to steady emigration, and where remittances represent the largest capital inflows for many countries now. Focusing on the past two decades (1999-2019), this study finds that on average emigration has a negative and statistically significant impact on contemporaneous economic growth and change in labor force participation in the countries of origin across LAC, while remittances partially mitigate this adverse impact—especially on economic growth—resulting in a small negative net joint effect. There are significant differences across subregions for all estimates, with the largest negative effects observed in the Caribbean. In addition, the negative impact of emigration and remittances on the change in labor participation is small, but for the youngest cohort (15-24) is twice as large as for the overall labor force participation. The results are robust to various specifications, variables, and measurements of emigration and remittances.
August 2024, IMF Working Paper
Supply and Demand Determinants of Heterogeneous VAT Pass-Through
with Matthieu Bellon and Alexander Copestake
Abstract: We investigate the substantial variation in the extent to which a rise in value-added tax (VAT) is passed on to consumers. We first extend existing theory to characterize the roles of imperfect competition and product differentiation, then investigate these relationships empirically using a panel of 14 Eurozone countries between 1999 and 2013. We find that consumers pay a larger share of VAT increases when producers face more competitive upstream markets: the higher tax reduces final demand, but this lower demand does not in turn reduce input prices as much when upstream markets are competitive. Greater scope for quality differentiation also increases pass-through, by reducing the relative price elasticity of demand.
Revise and Resubmit
The Scarring Effect of Natural Disasters on Labour Market: Evidence from the Philippines
with Yiliang Li
Abstract: We investigate the impact of a major typhoon on the short-term and long- term outcomes in the labour market. Among all the typhoons, Haiyan, also known locally as “Yolanda”, struck the Philippines on 8 November 2013, in what was reportedly the country’s worst-ever natural disaster, despite that the Philippines is considered the third most disaster-prone country in the world. Treating the Typhoon Yolanda as a natural experiment, we adopt a Difference-in-Differences strategy to estimate its impact on the labour market. We found that there is a non-linear effect from the severity of the disaster on the wage of the affected area, where the medium-affected regions are affected most. Event study results show that both daily and weekly pay decrease after the typhoon for the regions which experienced medium or high level of the shock, while such result is stronger in the mediumly-affected area. This suggests that Typhoon Yolanda may have a more profound effect on the labour market through labour supply, in addition to reduction in labour demand. Potential mechanisms to the non-linearity include reallocation of labour, both at regional and sectoral level. While labour migration is not observed from survey data, there is suggestive evidence that there is less structural change happening in the medium affected area, compared to the other regions, where people are less likely to move from agriculture to industrial or service sectors.