The Importance of Human Capital in China’s Regional Income Gaps

Migration is treated as a natural experiment that reveals the productivity of a migrant worker in the presence of the physical capital and TFP of the migrant’s destination location. The difference between the wages of migrants and non-migrants with the same measured skills in the destination region provides an estimate of the gap between the unmeasured human capital of destination-region native workers compared to native workers in the source region. Unmeasured human capital differences may reflect regional differences in the quality of schooling; work-related traits produced in the household such as nutrition, work skills and attitudes; and health, and so on, as well as other socioeconomic influences including public-health infrastructure. 

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