Abstract: Hukou reform is one of the key projects for advancing new urbanization. The main issue of the reform is developmental governments preferring land urbanization rather than population urbanization due to their financial expenditure and economic incentives. However, external incentives are difficult to explain the regional divergence of the same policy. Why does a number of developed small cities lag behind in the hukou reform? According to the case of city A in Jiangsu Province, local government's behavior follows the blame-avoiding logic besides the developmental logic, resulting to ″blame-avoiding local fragmentation″. In other words, the ministry of public security is in charge of the hukou reform, while there are various implicit costs paid by the other ministries. For example, the opportunity costs of land use, which is scarce in developed small cities, aggravate the complications for expanding education resource supply, as well as the risks caused by insufficient supply of basic education. As the local governments of the ministries which pay for the hukou reform are not the ones benefit from it, the supporting ministries lack motivation to take the additional costs incurred from the hukou reform, though their responsibilities are clearly stipulated. In conclusion, the organizational behavior is influenced by internal structure besides hierarchical motivators, and moderated by resource limitation, leading to the policy implementation gap among different cities. Not only the central government but also the local governments should struggle for hukou reform implementation, by regulating the costs and benefits among local governments, preventing the blame-avoiding behavior of the supporting ministries.