Direct and Spillover Effects of Targeted Cash Transfers on Ethnic Rural-Urban Migration in China

51 Pages Posted: 20 Oct 2017

See all articles by Anthony Howell

Anthony Howell

Peking University - School of Economics

Date Written: October 20, 2017

Abstract

This paper relies on recent proprietary data from China’s poor rural minority areas to examine the importance of credit constraints on rural-urban labor migration. Specifically, a liquidity shock via China’s minimum living security allowance (MLSA) program is decomposed into its direct and indirect parts. The institutional features of the MLSA program permit an identification strategy that relies on a set of verifiable assumptions and an instrument variable (IV) framework. The results reveal that the direct effect on migration of MLSA is negative, although the net effect is positive driven by the large indirect effects, which are twice as large for ethnic minorities compared to the Han majority. Subsequent evidence further suggests that the main mechanism behind the indirect effect is informal inter-personal lending fostered by risk-sharing strategies. The findings imply that once liquidity is injected into a village it gets circulated in the community, stimulating migration particularly within credit constrained minority communities.

Keywords: Rural-Urban Migration, Ethnicity, Targeted Cash Transfers, Risk-Sharing Mechanisms, Liquidity Constraints

JEL Classification: R23, J61, J18, C21

Suggested Citation

Howell, Anthony, Direct and Spillover Effects of Targeted Cash Transfers on Ethnic Rural-Urban Migration in China (October 20, 2017). Available at SSRN: https://ssrn.com/abstract=3056120 or http://dx.doi.org/10.2139/ssrn.3056120

Anthony Howell (Contact Author)

Peking University - School of Economics ( email )

Summer Palace Road 5
Haidian District
Beijing, Beijing 100871
China

HOME PAGE: http://www.tonyjhowell.com

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