Does Internal Immigration Always Lead to Urban Unemployment in Emerging Economies? : A Structural Approach Based on Data from China

Immigration restrictions usually arise from the idea that immigrants compete with original residents for jobs. Their effects on urban job creation are often ignored. In this study, we develop an inner-city dual labor market model that incorporates both of those effects, and apply it to empirical studies on China. We find that rural-urban immigration does not contribute to urban unemployment in China. Migrants take away some jobs from residents, but at the same time, they lower equilibrium wages and increase output, which expand the demand for resident workers. This latter positive impact is larger than the former substitution effect in China.