Connectivity and Selective Rural Migration

Abstract

ABSTRACT How does infrastructure shape rural development? Using household panel data from a nationally representative sample of Chinese villages, matched to high‐resolution highway maps, we find that road expansion between 2000 and 2015 operates mainly through reallocation, with less productive farmers scaling down or exiting and more productive farmers remaining and expanding. We quantify the aggregate and distributional consequences in a dynamic spatial equilibrium model with heterogeneous households and endogenous migration. Improved connectivity not only accelerates urbanization but also increases aggregate rural output by 2.2%–5.3% in the long run, even as the rural workforce declines.