Highway Construction, Labor Reallocation, and Welfare Gains Under Migration Frictions

Bibliographic Data

ID21353022
AuthorsYang Xu (0000-0003-3898-022X, School of Economics and Wang Yanan Institute for Studies in Economics Xiamen University Xiamen China), Xi Yang (0000-0002-5095-6735, School of Economics and Wang Yanan Institute for Studies in Economics Xiamen University Xiamen China, corresponding author)
Year2025
Volume65
Issue4
Pages1156-1178
Publication date2025-09-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueJournal of Regional Science (JOURNAL)
Journal identifiersISSN: 0022-4146 • E-ISSN: 1467-9787
PublisherWiley (PUBLISHER • GB)
DOI10.1111/jors.12778
OpenAlexW4410069736
LanguageEN
References cited35

This paper studies the implications of the extent of labor reallocation for the welfare impacts of spatial policies. Migration frictions lead to imperfect spatial arbitrage in individual well‐being, making the impacts of spatial policies dependent on the extent of labor reallocation. We quantify the welfare gains from highway construction in China between 2000 and 2013 under limited labor reallocation with unbalanced labor flows, and compare them to the gains under flexible labor reallocation, where labor flows balance in each city. We show that flexible reallocation amplifies the welfare gains by 19%, with the reduced migration frictions contributing more to the overall welfare gain. It also weakens the welfare distributional effects of highways by reversing migration flows between small and large cities

Economics · Labour economics · Market economy · Welfare · Fiscal Policy and Economic Growth · Global trade and economics · Migration and Labor Dynamics