Human Capital and Urbanization in the People’s Republic of China

Abstract

This chapter explores the relationship between human capital development and urbanization in the People’s Republic of China, highlighting the Hukou system and decentralized fiscal system. Educated workers disproportionately reside in urban areas and in large cities, and the returns to education are higher in urban areas relative to those in rural areas, and in large, educated cities relative to small, less educated cities. In addition, the external returns to education in urban areas are at least comparable to the magnitude of private returns. Rural areas are the major reservoir for urban population growth, and the more educated have a higher chance of moving to cities and obtaining urban Hukou. As for health, rural–urban migration is selective in that healthy rural residents choose to migrate. However, occupational choices and living conditions are detrimental to migrants’ health. While migration has a positive effect on migrant children, its effect on ‘left-behind’ children is unclear.