China’s Mobility Barriers and Employment Allocations

Abstract

China's hukou system imposes two main barriers to population movements. Agricultural workers get land to cultivate but are unable to trade it in a frictionless market. Social transfers (education, health, etc.) are conditional on holding a local hukou. We show that the land policy leads to over-employment in agriculture and it is the more important barrier to industrialization. E¤ective land tenure guarantees and a perfect competitive rental market would correct this ine¢ ciency. The local restrictions on social transfers favour rural enterprises over urban employment with a relatively smaller impact on industrialization.

Misallocation, Selection and Productivity: A Quantitative Analysis with Panel Data from China

“…In addition, allowing factor inputs to be allocated efficiently across villages, the gains more than double to 53.2 percent, with more than 2/3 of these gains accounted for by labor mobility across villages. This suggests that the land policy in China may be a substantial contributor to the barriers of labor mobility across space (De Janvry et al, 2015;Ngai et al, 2019) and its depressing impact on productivity. Moreover, we do not find substantial changes in the extent of misallocation over time, consistent with an absence of substantial changes in China's land market institutions over this period.…”

Property Rights Reform to Support China's Rural–Urban Integration: Village‐Level Evidence from the Chengdu Experiment

“…While these problems would be eliminated if direct rural–urban land transfers were allowed, few rural residents would be willing to give up their land unless an equivalent social safety net and source of income in old age was available (Ong, ). This implies not only that land policy is a key barrier to industrialization but also that, in light of migrants’ lack of interest in giving up their land rights for an urban hukou , giving property rights to farmers would be a straightforward way to eliminate this distortion (Ngai et al ., ).…”

“…An estimated 140-150 million migrants live in some 50,000 urban villages (Tan et al, 2011). if direct rural-urban land transfers were allowed, few rural residents would be willing to give up their land unless an equivalent social safety net and source of income in old age was available (Ong, 2014). This implies not only that land policy is a key barrier to industrialization but also that, in light of migrants' lack of interest in giving up their land rights for an urban hukou, giving property rights to farmers would be a straightforward way to eliminate this distortion (Ngai et al, 2016). Efforts to reform the hukou system with location-specific policies date back to the 1980s, when administrative power was decentralized to local governments (Wang, 2005).…”

“…Inability to sell or lease rural land together with urban residency permits (hukou) that require migrants to give up rural land in order to qualify for urban social services both discourage movement from farm to city (Bosker, Deichmann and Roberts, 2015). Reducing migrants' access to services unless they give up rights to rural land (Song, 2014) may also promote over-employment in agriculture (Ngai, Pissarides and Wang, 2016) and reduce migrant performance because of stereotyping (Afridi, Li and Ren, 2015). While eliminating hukou restrictions could improve equity (Whalley and Zhang, 2007), it can only be fully effective if land rights are fully transferable as well.…”

A quantitative analysis of Hukou reform in Chinese cities: 2000–2016

“…How does Hukou distort the city sizes and city size distribution and urban welfare (Au & Henderson, ; Desmet & Rossi‐Hansberg, )? Theoretical findings on Hukou and employment allocations (Ngai, Pissarides, & Wang, in press) can also be put into empirical tests utilizing the quantitative Hukou stringency measures in this paper.…”