We apply a skill-based directional migration model to examine the importance of knowledge and
human capital spillovers to China’s economic development. Those spillovers augment private
investment in idea discovery and human capital and are central to modern theories of spatial
equilibrium and endogenous economic growth (Romer 1986 and 1990, Lucas 1988 and 2004,
and Glaeser and Gottleib 2009). Upon accounting for regional differentials in skill-based
compensation, cost-of-living, and natural and other amenities, model estimation indicates that
high-skill migrants attach significant importance to knowledge and human capital spillovers
arising from FDI and human capital concentration in destination regions. Among low-skill
migrants, the importance of spillover effects is considerably damped, reflecting institutional and
other barriers to social interactions and human capital investment in destination cities. Findings
provide new insights as regards the failure of labor migration to alleviate persistent regional
disparities in China’s economic development. Moreover, results suggest important potential
welfare gains for low-skill migrants associated with moves that provide greater access to
spillover benefits.