Effect of goods market segmentation on labor mobility: Evidence from China

Abstract This study empirically investigates the effects of goods market segmentation on interregional labor mobility using data from National Population Surveys in China. The findings reveal that a one‐standard deviation increase in the goods market segmentation index reduces interprovincial migration by 4.0%. Restraining interregional trade and improving industrial specialization are the two mechanisms at work. Further analysis indicates that the restrictive effect of goods market segmentation is greater on highly educated laborers and the labor flows from poorer to richer regions. The heterogeneous analysis also implies that migrants are more concerned about educational resources and consumption diversity.