The Migration Response to Uneven Policy Shocks: Evidence from China’s 2014 Hukou Reforms

Abstract

I assess the effects of the 2014 reforms to China’s hukou internal registration system, which lowered barriers to entry for rural migrants to cities with 5 million or fewer residents, on migration decisions, wages, and aggregate output levels. Compared to urban hukou holders, migrants from rural areas were 21% more likely to choose smaller cities than untreated larger cities post-2014 conditional on moving. Rural hukou holders were 3.5% more likely than urban hukou holders to move to smaller cities post-2014 unconditional on migration, while being only 0.2% more likely to move to larger cities. Lower-skilled, middle-aged, and female migrants were more affected by the 2014 reforms than other populations, and college graduates were largely unaffected. Annual wage growth was nearly 3% higher in larger cities than smaller cities from 2014-2020 than before the reforms ceteris paribus, suggesting a shift in migrant labor supply towards smaller cities. To evaluate general equilibrium effects, I develop a structural model of internal migration within China capturing location-specific skill draws and heterogeneous skill requirements over space. Counterfactuals estimated using identified Frechet and movement parameters suggest a 4.7% aggregate output gain from the 2014 reforms and a 4.4% aggregate output gain if all remaining hukou barriers are lifted.