Beyond Lewis: rural-to-urban migration with endogenous policy change

Purpose – This paper aims to answer the following questions concerning rural-to-urban labor migration in China: What is the impact of discrimination against non-Hukou in urban public service provision? Will such discrimination disappear in the future within the current policy-making framework? What is the result of such an endogenous policy change as far as urbanization and economic growth are concerned? Design/methodology/approach – The authors build a theoretical model of rural-urban migration, taking into account the cost of social conflict due to discrimination against urban non-Hukou in local public service. The possibility of endogenous policy change is also considered by numerical simulation. Findings – The authors prove that, in the early stage of urban economic growth when the losses of potential conflicts are relatively small, the exclusive urban public service provision may be beneficial to them, but the losses under such unequal public service provision policy increase in the process of urban growth, and after a certain stage of development, opening public service access equally to the immigrants will be a better choice, even if only the natives' utility is considered. Such an endogenous policy change not only decreases the within-city inequality and conflicts, but also advances the urbanization and urban economic growth. Research limitations/implications – The authors only consider two extreme cases of local public service provision, that is, the urban non-Hukou residents have equal access to public service or they are totally not entitled. The possibility of partial access to local public service is not considered in the model. Originality/value – The authors investigate impact of social conflicts on within-city inequality, urbanization as well as urban economic growth due to unequal social public service within urban residents. The model also shows an endogenous policy change during rural-urban labor migration.