The Local Labor Market Effect of Relaxing Internal Migration Restrictions: Evidence from China

76 Pages Posted: 16 Jul 2020 Last revised: 10 May 2022

See all articles by Lei An

Lei An

Xi'an Jiaotong University (XJTU) - School of Economics and Finance

Yu Qin

National University of Singapore (NUS) - Department of Real Estate

Jing Wu

Tsinghua University - Hang Lung Center for Real Estate; Tsinghua University - Department of Construction Management

Wei You

Peking University

Date Written: January 27, 2021

Abstract

Internal migrants account for 10.8% of the world population today and are expected to cause substantial distributional effects between themselves and native residents in rapidly urbanizing countries. In this paper, we study how a significant relaxation of internal-migration restrictions affects labor market outcomes of both incumbent migrants and natives, exploiting the 2014 Hukou reform in China. This reform substantially removed the migration barriers of cities with an urban population below 5 million (non-megacities) but kept the migration barriers in megacities unchanged. Using a difference-in-differences method, we find migrants’ wages in non-megacities experienced approximately a 2.6%–7.9% decline relative to that in megacities after the policy shock. The negative effects were stronger among less educated incumbent migrants. By contrast, the policy change had non-negative impacts on the wages and labor market participation rates of the natives in non-megacities. These results suggest the downward wage pressure imposed by an inflow of migrants falls primarily on incumbent migrants rather than on natives.

Keywords: hukou system, internal migration, migration restriction, labor market outcome

JEL Classification: J31, J61, J68

Suggested Citation

An, Lei and Qin, Yu and Wu, Jing and You, Wei, The Local Labor Market Effect of Relaxing Internal Migration Restrictions: Evidence from China (January 27, 2021). Available at SSRN: https://ssrn.com/abstract=3626292 or http://dx.doi.org/10.2139/ssrn.3626292

Lei An

Xi'an Jiaotong University (XJTU) - School of Economics and Finance ( email )

No.74, Yanta Road, Xi'an, Shaanxi, P.R. China
Xi'an, Shaanxi 710061
China

Yu Qin (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

Jing Wu

Tsinghua University - Hang Lung Center for Real Estate ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://thuwujing.net

Tsinghua University - Department of Construction Management ( email )

Heshanheng Building
Tsinghua University
Beijing, 100084
China

HOME PAGE: http://thuwujing.net

Wei You

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

HOME PAGE: http://https://sites.google.com/site/youweilucky/

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