Academic journal article Contemporary Economic Policy

The Regulation of Migration in a Transition Economy: China's Hukou System

Academic journal article Contemporary Economic Policy

The Regulation of Migration in a Transition Economy: China's Hukou System

Article excerpt

1. INTRODUCTION

In most countries, internal migration is unregulated. That is not the case in China, where migration is restricted through a "Household Registration System," also called "Hukou." Instituted in 1958, Hukou required every citizen seeking a change in residence to obtain permission from the public security bureau. If one wanted to move from a rural to urban area, for example he (or she) had to convert his (or her) local registration status from "agricultural" to "nonagricultural," an approval that was usually very difficult. (1) It has also been very difficult to move from a small city to a large city under Hukou. Urban registration brings substantial benefits such as access to coveted jobs in the state sector, housing, public schooling, and health care. (2) Hukou imposes both direct and indirect costs of relocation. For example, permanently leaving a village requires a migrant to abandon claims to land ownership and profits of village-owned industries. Hukou is effectively an internal passport system, as moving within or across provincial boundaries in China is analogous to moving across international boundaries. Thus, for researchers interested in the study of how restrictions affect the scale and structure of worldwide migration, China is a tremendously valuable natural experiment.

Hukou has undergone an incremental dismantling over the last three decades. The history of this dismantling may be broken down into three periods--the 1980s, 1990s, and post-2000 period. (3) Up to the late 1980s, anyone wishing to travel within China had to show an official "permission" letter from his or her local government. Beginning in the late 1980s, identity cards replaced permission letters, making it much easier to travel. During the early 1990s, grain rationing coupons were abolished. These coupons had been the means by which people obtained food rations and they could only be used in the place of residence. In 2001, residency in small towns and townships was opened to all rural workers who were legally employed and had a place to live. At roughly the same time, medium-sized cities and some provincial capitals eliminated ceilings on the number of rural workers who could apply for permanent residence status or offer temporary registration for nonlocal residents. Some very large cities such as Shanghai and Beijing also eased restrictions on in-migration of nonlocal residents. (4) Since census data on migration flows are available back to 1985-90, a test of deregulation's effects is feasible.

A small and mostly empirical literature on the determinants of internal migration in China has emerged. Its focus has been to examine the extent to which migration flows are driven by regional differences in labor markets. (5) While most researchers recognize the influence of Hukou on Chinese migration patterns, no study has attempted to estimate its effects on the scale and structure of migration. (6) While there have been applications of the modified gravity model to the Chinese case, no study has estimated this model with a Hukou measure included. (7) The most closely related study is Poncet (2006). She argued that as deregulation intensified, migration should have become more responsive to economic factors. Estimating a modified gravity model on migration data for 1985-90 and 1990-95, Poncet found that intra - and inter-provincial migration rates were more responsive to spatial income and unemployment rate differences during 1990-95. However, she did not include a Hukou variable in either her theoretical model or empirical specifications. Furthermore, Poncet's coefficient estimates likely suffer from omitted variables bias because a number of important controls were absent. Missing controls include migrant networks, foreign and domestic investments, industry mix, demographic characteristics, climate, and educational attainment.

The goal of this study is twofold. First, we seek to estimate migration's sensitivity to Hukou. …

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