The Impacts of New-round Hukou Reform on Rural-urban Migration: Theoretical Mechanisms and Empirical Evidence

Abstract

In economies experiencing continuous growth in the working-age population and a declining dependency ratio, the population structure plays a crucial role in driving rapid economic growth and unlocking a demographic dividend. However, as China’s population ages, the unlimited labor force supply diminishes, resulting in the waning of the demographic dividend. Effectively reallocating the labor force between urban and rural areas is imperative to maximize China’s demographic dividend. Nevertheless, institutional barriers, such as urban-rural labor market segmentation due to the household registration system and disparities in public service accessibility, hinder the free allocation of labor resources between these areas. Against this backdrop, this study investigates the impact of the new-round Hukou reform on labor force reallocation, holding significant theoretical and practical value.

The research constructs an analytical framework for labor migration decision-making, revealing the theoretical mechanisms through which Hukou reform influences rural-urban migration. Subsequent empirical analysis, based on China Family Panel Studies data from 2012 to 2018, demonstrates that the Hukou reform significantly promotes rural labor migration to cities. After the policy shock, the proportion of rural labor with rural Hukou decreases by 3.4% in treatment cities compared to control cities, equivalent to a 1.9% increase in urban Hukou labor and a 1.5% increase in city migrants. The Hukou reform lowers the household registration threshold and equalizes access to public services, reducing migration costs and increasing migration benefits, thereby facilitating labor force reallocation between urban and rural areas. However, constraints such as urban fiscal pressures, hometown agricultural land value, psychological and social integration costs, and unstable employment can impede the labor force reallocation effects of Hukou reform. In addition, the labor reallocation effect caused by the Hukou reform leads to the differentiation of human capital between mega cities and non-mega cities. The paper throws light on deepening the understanding of Hukou reform, ensuring public service equalization, extending the demographic dividend, and promoting balanced development in cities.

This paper contributes in three main aspects. First, it expands the literature on the household registration system and its impact on labor mobility, providing empirical evidence for potential rural-urban migration in China by evaluating the policy effects of the 2014 Hukou reform. Second, it complements existing research on the driving forces and constraining factors of internal migration. Through rigorous causal inference strategies, this study reveals the mechanisms of urban-rural labor reallocation under the new-round Hukou reform, offering insights for deepening Hukou reform and improving supporting policies. Third, it enriches research on the issues of the human capital gap between mega-cities, small and medium-sized cities, providing new evidence from the perspective of Hukou restrictions for understanding the human capital advantage and wage premium in mega-cities.