Migration and Inequality

1
Migration and Inequality

• Lecturer Zhigang Li

2
Hukou and Inequality(Liu 2005)

• Question How does a change in Hukou status from
  rural to urban affect a persons 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.

3
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.

4
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.

5
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).

6
(No Transcript)
7
(No Transcript)
8
(No Transcript)
9
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.

10
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.

11
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.

12
Experiment 2 Allow for Within-Region Inequality

• Inequality decrease after the migration barriers
  are abolished.
• Significant inequality remains.

13
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.

14
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.

15
Theory of Occupational Segregation

• Poor job matching for new immigrants
• Schooling of immigrants is not the same as
  schooling of natives.
• Discrimination against immigrants.

16
(No Transcript)
17
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.

18
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.