Migration and Inequality

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					Migration and
Lecturer: Zhigang Li
        Hukou and Inequality
            (Liu 2005)
• Question: How does a change in Hukou status
  from rural to urban affect a person’s investment
  in human capital and labor market performance?
   – Do people who obtain an urban hukou late in their lives
     do worse than those who obtain urban hukou earlier?

• Answering the question may help us understand:
   – Urban-rural income differential
   – Income differential between recent and early hukou
      The Hukou System
• The implementation of the hukou system is
  supported by the ration system established in
   – Under the ration system, basic staples such as grain,
     meat, cooking oil, sugar and cotton could be bought only
     in state-run stores using ration coupons.
   – Rural residents were excluded from the ration system
     and were expected to be self-sufficient in food.
• Another important contributing factor to the
  hukou system is the state control of urban
             Hukou Reform
• Since 1990, the hukou system has become more
  flexible. New types of residential registration
  forms (administered by local governments) were
   – Temporary residential permit
   – Blue-stamp hukou (blue card): Mainly issued to investors,
     buyers of property, and professionals, the blue-stamp
     hukou functions more like the regular hukou.
   – A direct purchase of an urban hukou also became
     possible in recent years. Between 1990 and 1994, local
     government sold about 3 million hukou at an average
     price of 8300 yuan a piece.
   – Rural hukou holders can now attend schools in urban
     cities, but they need to pay fees and tuitions
     substantially higher.
• Chinese Household Income Project 1995
• All the urban individuals in the sample had urban
  hukou in 1995, although they obtained it at
  different ages.
   – Most of the individuals obtained urban resident status
     within three years of birth. About 20% received urban
     hukou after 15 (middle school).
• The policy denies the rural population access to
  quality education, resulting in lower educational
  attainment by rural residents relative to their
  urban counterparts.
• The hukou system deprives the rural population
  access to urban employment that rewards
  education more than does rural employment.
• By differentiating opportunity structures for
  rural and urban population, the hukou system may
  be a major cause of rural-urban disparity.
Impact of Removing Hukou
(Whalley and Zhang, 2004)
• Method: Calibrate an economic model
  to base case data and then remove
  migration restrictions. Inequality
  changes can then be calculated.
   Experiment 1: Remove
     Migration Barrier
• Findings
  – Significant migration from rural to
    urban (200-600 million).
  – Rural wage increase. Urban wage fall. No
    inequality in equilibrium.
  – Total output increase slightly.
  Experiment 2: Allow for
  Within-Region Inequality
• Inequality decrease after the
  migration barriers are abolished.
• Significant inequality remains.
  Experiment 3: Allow for
  Housing Prices to Change
• People migrate from poor to rich regions.
• The migration magnitude is relatively small
  because housing prices increase in region
  with migrants.
• Inequality may increase in regions with
  migrants due to increased housing prices.
  Occupational Segregation between
 Natives and Immigrants in Hong Kong
           (Liu et al., 2004)
• Hong Kong is a society of immigrants
  – In 1996, 60% of HK workforce were native born. About
    33% are immigrants from mainland China.
  – Between 1898 and 1950, Chinese citizens could freely
    enter and leave HK.
  – Between 1950 and 1979, strict rules were enforced
    forbidding people migrating to HK, but people who
    successfully reached HK will be allowed to stay.
  – After 1979, illegal migrants to HK were sent back.
  Theory of Occupational
• Poor job matching for new
• Schooling of immigrants is not the
  same as schooling of natives.
• Discrimination against immigrants.
     Empirical Findings I
• If the immigrants were to face the same
  occupation structure as the natives:
   – The proportions of immigrants who would be
     managers/administrators, professionals and associate
     professionals (about 5%), clerks and plant operators
     would increase
   – Immigrants who would be service, craft or elementary
     workers would fall.
    Empirical Findings II
• As the duration of residence rises from less than
  5 years to more than 20 years, occupational
  segregation declines from 22% to 5%.

• Occupational segregation is found to be non-
  existent for immigrants who came to HK before
  10 years old. For immigrants who came to HK when
  they were over 20 years old, occupational
  segregation is around 15% of wage differentials.

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