To Stay or to Migrate? Rural-urban Migration and the One-Child Policy in China

With a dynamic macroeconomic model built to tailor the institutions of China, this paper studies how fertility control and migration policies shaped the rural-urban migration pattern and the economic development of China. Different from the reduced-form approach adopted by most of the existing literature, we develop a model of heterogeneous agents with endogenous fertility and migration decisions. More specifically, the land entitlement of rural households, the different fertility control policies across urban and rural areas, and the household registration system are introduced into the model. This study therefore provides a micro-funded macroeconomic model that enables us to examine how different policies interact with each other to affect the fertility, the migration decision and the subsequent differentials in economic development across urban and rural China. Calibration analysis of the model is performed, and numerical analyses examining the significances of the “pull” and “retain” factors of migration and their effects on output levels, the migration decisions as well as the fertility differentials are performed. Finally, policy experiments on the land entitlement system, migration regulations as well as fertility policies are provided.