We combine a unique collection of microdata from China with a natural experiment to investigate the extent to which reductions in rural-urban migration costs increase flows of trade and investment and the underlying channels. We find that increases in worker eligibility for urban residence registration (Hukou) across origin-destination pairs lead to significant increases in rural-urban exports, imports, capital inflows and outflows, both in terms of bilateral transaction values and the number of unique buyer-seller matches. We then use our estimates to quantify the implications of China's recent Hukou reforms on urban migration market access and the resulting gains in trade market access from reductions in buyer-seller matching frictions due to migration. We find that a 10% increase in a rural county's urban migration market access on average leads to a 2% increase in the region's trade market access. We also find that these additional gains from migration were on average larger among the urban destinations of the Hukou reforms compared to the rural origins, thus reinforcing incentives for rural-urban migration in spatial equilibrium.
