This study applies unique data from the 1990s period of economic liberalization in China to
evaluate the effects of human capital spillovers on urbanization and regional agglomeration of
human capital. We examine these effects via a utility maximizing directional migration model,
which accounts for heterogeneous migration costs and benefits among population strata. We use
model estimates to decompose and evaluate human capital spillover effects as derive from three
distinct sources, including productivity effects (social returns to schooling), skill premia (skill
complementarity in production), and non-wage benefits (quality of life and learning
opportunities). In contrast to extant literature emphasizing skill complementarity, we find
significantly stronger non-wage than wage effects in the determination of regional human capital
agglomeration. However, among low-skill migrants, non-wage benefits are substantially
reduced—due likely to urban segregation that deprives low-skill migrants of social
externalities. This finding suggests limited human capital spillovers among low-skill migrants
and hence dampened long-run growth benefits to Chinese urbanization. Finally, we find that
urban concentration of skilled workers was more important than foreign direct investment, the
prominent source of technology transfer in China during the 1990s, in attracting skilled workers.