Interprovincial Migration and Human Capital Formation in China

Abstract

This study examines how rising interprovincial migration with diverse education backgrounds affects new human capital formation in China in the 1990s. Consistently with a simple model of migration-oriented investment and disinvestment in higher education, we identify that gross outflow migration of those with higher and lower schooling qualifications respectively generates external economies and diseconomies in school enrollments in source provinces. The observed positive externality eclipses negative one suggesting that increased mobility of workers fortifies human capital stock at national level and thereby reinforces prospects of development in China. We also find that changes in relative labor supply resulted from net outflow migration mitigate direct brain drain by both encouraging and discouraging school enrollments.

Keywords: Brain drain, migration, human capital, schooling, China

JEL Classification: I2, J24, J61, O15