Migration and Inequality 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 grantees. The Hukou System • The implementation of the hukou system is supported by the ration system established in 1955. – 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 employment. Hukou Reform • Since 1990, the hukou system has become more flexible. New types of residential registration forms (administered by local governments) were introduced – 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. Data • 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). Findings • 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 Segregation • Poor job matching for new immigrants • 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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