This study seeks to distinguish among competing theories of urbanization in an explanation of recent,
massive rural-to-urban migration in China. Specifically, the research evaluates whether Chinese
urbanization following the 1990s liberalization of mobility and residential location restrictions was driven
by migrant learning opportunities as in the skill-transition urbanization technology (Lucas, 2004), or
instead was associated with a traditional dual-skill urbanization technology in which opportunities for
migrant skill upgrading were largely absent. The analysis is facilitated by the application of an unusually
rich data set to estimate skill-based selection of Chinese migrants in the context of a utility-maximizing
directional migration model. Research findings suggest substantial differentials across skill-based strata
in migratory response to regional disparities in returns to education. Model simulation further indicates
that those disparities derive largely from regional variations in human capital rather than from positive
skill complementarities in production (Giannetti, 2003; Berry and Glaeser, 2005) and accordingly serve to
encourage regional convergence in human capital concentration. Further, results fail to support the
hypothesis that benefits of human capital externalities in learning accrue to low-skilled migrants.
According to Lucas (2004), such benefits operate as a key mechanism for economic transition from a
dual-skill economy to a modern urbanized economy. The lack of such human capital externalities is
consistent with the pervasiveness of institutional barriers in China which sustained urban segregation in
occupation and social interactions to the disadvantage of low-skilled migrants (Wang and Zuo, 1999).
Our estimates do show strong social interaction benefits for the educated population strata, which
contributed to regional divergence in human capital concentration.