Observing rapid structural transformation accompanied by a continual process of rural to urban migration in many developing countries, we construct a micro founded dynamic framework to explore how important education-based migration is, as opposed to work-based migration, for economic development, urbanization and city workforce composition. We then calibrate our model to fit the data from China over the period from 1980 to 2007, a developing economy featuring not only large migration flows but major institutional reforms that may affect work and education based migration differently. We find that, although education-based migration only amounts to one-fifth of that of work-based migration, its contribution to the enhancement of per capita output is larger than that of work-based migration. Moreover, the abolishment of the government job assignment for college graduates and the relaxation of the work-based migration have limited effects on economic development and urbanization. Furthermore, the increase in college admission selectivity for rural students plays a crucial but negative role in China's development, lowering per capita output and worsening the high-skilled employment share in urban areas.
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