Hukou and Consumption Heterogeneity: Migrants’ Expenditure is Depressed by Institutional Constraints in Urban China

Abstract:     
This paper provides a new explanation for China’s extremely low consumption-to-GDP ratio, highlighting the constraints of the “household registration system” (Hukou) on China’s household consumption. Our baseline results show that the consumption of migrants without an urban Hukou is 30.7% lower than that of urban residents. Moreover, consumption heterogeneity cannot be explained by migration effects, culture, social norms, habits or some other forms of household heterogeneity. Further studies on the composition of household consumption have shown that the gaps are largest in areas such as education and culture, durable goods and health. As both the number and income level of migrants are rising, the constraining effects of Hukou on household consumption will continue to increase.

Number of Pages in PDF File: 43

Keywords: Consumption, heterogeneity, Hukou system, migrants, urban residents

JEL Classification: R23, E21

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