China's Hukou system poses severe restrictions on labor mobility. This paper assesses the consequences of relaxing … these restrictions for China's internal economic geography. We base our analysis on a new economic geography model. First …, we obtain estimates of the important model parameters on the basis of information on 264 of China's prefecture cities …

firms in China. Using a unique and detailed dataset on manufacturing firms in China, we are able to follow the changes in … location patterns of firms between 2002 and 2008. Our analysis shows that firms in China are more localized than in the UK or … state-owned firms. Our findings are consistent with the notion that China is increasingly liberalizing its economy, enabling …