IDEAS home Printed from https://ideas.repec.org/a/bla/rdevec/v25y2021i4p2298-2322.html
   My bibliography  Save this article

Urban segregation and consumption inequality: Does hukou conversion matter in China?

Author

Listed:
  • Le Wen
  • Krishna P. Paudel
  • Youhua Chen
  • Qinying He

Abstract

This paper develops a simple theoretical model and offers empirical evidence of urban segregation on consumption inequality between rural‐to‐urban migrants and urban residents. Our analyses are based on the 2007 China Household Income Project (CHIP) and the 2017 China Migrants Dynamics Survey (CMDS) data. Results obtained from propensity score matching and 2SLS methods show that urban segregation caused by the hukou system leads to significant consumption inequality between rural‐to‐urban migrants and urban residents. Hukou conversion matters for improving migrants’ consumption, but when or how hukou was transferred makes little difference. Besides, we find that the disparity in consumption between rural‐to‐urban migrants and urban residents is more prominent in the higher‐income group or in cities with stricter restrictions on hukou conversion. Finally, our results are robust to a series of sensitivity checks.

Suggested Citation

  • Le Wen & Krishna P. Paudel & Youhua Chen & Qinying He, 2021. "Urban segregation and consumption inequality: Does hukou conversion matter in China?," Review of Development Economics, Wiley Blackwell, vol. 25(4), pages 2298-2322, November.
    • Handle: RePEc:bla:rdevec:v:25:y:2021:i:4:p:2298-2322
    DOI: 10.1111/rode.12805
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/rode.12805
    Download Restriction: no
    File URL: https://libkey.io/10.1111/rode.12805?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ludwig, Johannes, 2015. "The role of education and household composition for transitory and permanent income inequality–evidence from PSID data," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 129-146.
    2. George J Borjas & Ilpo Kauppinen & Panu Poutvaara, 2019. "Self-selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics," The Economic Journal, Royal Economic Society, vol. 129(617), pages 143-171.
    3. Afridi, Farzana & Li, Sherry Xin & Ren, Yufei, 2015. "Social identity and inequality: The impact of China's hukou system," Journal of Public Economics, Elsevier, vol. 123(C), pages 17-29.
    4. Djajić, Slobodan & Vinogradova, Alexandra, 2015. "Overshooting the Savings Target: Temporary Migration, Investment in Housing and Development," World Development, Elsevier, vol. 65(C), pages 110-121.
    5. Primiceri, Giorgio E. & van Rens, Thijs, 2009. "Heterogeneous life-cycle profiles, income risk and consumption inequality," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 20-39, January.
    6. Mumtaz, Haroon & Theophilopoulou, Angeliki, 2017. "The impact of monetary policy on inequality in the UK. An empirical analysis," European Economic Review, Elsevier, vol. 98(C), pages 410-423.
    7. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 163-193.
    8. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    9. Mark Aguiar & Mark Bils, 2015. "Has Consumption Inequality Mirrored Income Inequality?," American Economic Review, American Economic Association, vol. 105(9), pages 2725-2756, September.
    10. Thomas Bauer & Mathias Sinning, 2011. "The savings behavior of temporary and permanent migrants in Germany," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(2), pages 421-449, April.
    11. Guido W. Imbens, 2015. "Matching Methods in Practice: Three Examples," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 373-419.
    12. Wang, Chuhong & Akgüҫ, Mehtap & Liu, Xingfei & Tani, Massimiliano, 2020. "Expropriation with hukou change and labour market outcomes in China," China Economic Review, Elsevier, vol. 60(C).
    13. Gustafsson, Björn & LI, Shi & Sato, Hiroshi, 2014. "Data for studying earnings, the distribution of household income and poverty in China," China Economic Review, Elsevier, vol. 30(C), pages 419-431.
    14. Keaton S. Miller & Wesley W. Wilson & Nicholas G. Wood, 2020. "Environmentalism, Stimulus, And Inequality Reduction Through Industrial Policy: Did Cash For Clunkers Achieve The Trifecta?," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1109-1128, July.
    15. Han, Huawei & Gao, Qin, 2019. "Community-based welfare targeting and political elite capture: Evidence from rural China," World Development, Elsevier, vol. 115(C), pages 145-159.
    16. Christian Dustmann & Joseph-Simon Görlach, 2016. "The Economics of Temporary Migrations," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 98-136, March.
    17. Aviv Nevo & Adam M. Rosen, 2012. "Identification With Imperfect Instruments," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 659-671, August.
    18. Ma, Shuang & Mu, Ren, 2020. "Forced off the farm? Farmers’ labor allocation response to land requisition in China," World Development, Elsevier, vol. 132(C).
    19. Mark Aguiar & Erik Hurst, 2013. "Deconstructing Life Cycle Expenditure," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 437-492.
    20. Zhao, Da & Wu, Tianhao & He, Qiwei, 2017. "Consumption inequality and its evolution in urban China," China Economic Review, Elsevier, vol. 46(C), pages 208-228.
    21. Samuel Bowles & Yongjin Park, 2005. "Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right?," Economic Journal, Royal Economic Society, vol. 115(507), pages 397-412, November.
    22. Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2016. "Consumption Inequality and Family Labor Supply," American Economic Review, American Economic Association, vol. 106(2), pages 387-435, February.
    23. Trevor Tombe & Xiaodong Zhu, 2019. "Trade, Migration, and Productivity: A Quantitative Analysis of China," American Economic Review, American Economic Association, vol. 109(5), pages 1843-1872, May.
    24. Orazio Attanasio & Luigi Pistaferri, 2014. "Consumption Inequality over the Last Half Century: Some Evidence Using the New PSID Consumption Measure," American Economic Review, American Economic Association, vol. 104(5), pages 122-126, May.
    25. Song, Yang, 2014. "What should economists know about the current Chinese hukou system?," China Economic Review, Elsevier, vol. 29(C), pages 200-212.
    26. Donald R. Davis & Jonathan I. Dingel & Joan Monras & Eduardo Morales, 2019. "How Segregated Is Urban Consumption?," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1684-1738.
    27. Dustmann, Christian, 1997. "Return migration, uncertainty and precautionary savings," Journal of Development Economics, Elsevier, vol. 52(2), pages 295-316, April.
    28. Chen, Xiaofen, 2018. "Why do migrant households consume so little?," China Economic Review, Elsevier, vol. 49(C), pages 197-209.
    29. Xinhua Gu & Yang Zhang & Xiao Chang, 2017. "The role of financial systems for cross-country differences in the link between income and consumption inequality," Applied Economics, Taylor & Francis Journals, vol. 49(24), pages 2365-2378, May.
    30. Xinru Han & Sansi Yang & Yongfu Chen & Yongchun Wang, 2019. "Urban segregation and food consumption," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 11(4), pages 583-599, March.
    31. Dustmann, Christian & Mestres, Josep, 2010. "Remittances and temporary migration," Journal of Development Economics, Elsevier, vol. 92(1), pages 62-70, May.
    32. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 603-640.
    33. Galor, Oded & Stark, Oded, 1990. "Migrants' Savings, the Probability of Return Migration and Migrants' Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 463-467, May.
    34. Richard Blundell & Luigi Pistaferri & Ian Preston, 2008. "Consumption Inequality and Partial Insurance," American Economic Review, American Economic Association, vol. 98(5), pages 1887-1921, December.
    35. Chen, Binkai & Lu, Ming & Zhong, Ninghua, 2015. "How Urban Segregation Distorts Chinese Migrants’ Consumption?," World Development, Elsevier, vol. 70(C), pages 133-146.
    36. Chen, Yu & Shi, Shaobin & Tang, Yugang, 2019. "Valuing the urban hukou in China: Evidence from a regression discontinuity design for housing prices," Journal of Development Economics, Elsevier, vol. 141(C).
    37. Orazio P. Attanasio & Luigi Pistaferri, 2016. "Consumption Inequality," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 3-28, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhou Jiang & Maoxia Zeng & Mingming Shi, 2023. "E‐commerce and Consumption Inequality in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(5), pages 61-86, September.
    2. Nianzhai Ma & Weizeng Sun & Zhen Wang, 2022. "Host Identity and Consumption Behavior: Evidence from Rural–Urban Migrants in China," Sustainability, MDPI, vol. 14(19), pages 1-25, September.
    3. Wanglin Ma & Hongyun Zheng & Peng Yuan, 2022. "Impacts of cooperative membership on banana yield and risk exposure: Insights from China," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 564-579, June.
    4. Jian Cheng & Jiangmeng Zhao, 2023. "How Does Land Monopoly Reduce Consumption Levels? Evidence from China," Land, MDPI, vol. 12(9), pages 1-20, August.
    5. Dong, Xiaoqi & Liang, Yinhe & Zhang, Jiawei, 2023. "Fertility responses to the relaxation of migration restrictions: Evidence from the Hukou reform in China," China Economic Review, Elsevier, vol. 81(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Le Wen & Krishna P. Paudel & Qinying He, 2022. "Temporary Migration and Savings Rates: Evidence from China," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2810-2849, December.
    2. Wen, Le & Paudel, Krishna P. & He, Qinying, 2023. "Temporary migration and land renting behavior," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1372-1391.
    3. De Giorgi, Giacomo & Gambetti, Luca & Naguib, Costanza, 2020. "Life-Cycle Inequality: Blacks And Whites Differentials In Life Expectancy, Savings, Income, And Consumption," CEPR Discussion Papers 15182, C.E.P.R. Discussion Papers.
    4. Guowen Chen & Stephen B. DeLoach & T. M. Tonmoy Islam, 2023. "Precautionary savings and rural‐to‐urban migration: Evidence from Chinese hukou status," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 1215-1233, October.
    5. Theloudis, Alexandros, 2021. "Consumption inequality across heterogeneous families," European Economic Review, Elsevier, vol. 136(C).
    6. Giacomo De Giorgi & Luca Gambetti & Costanza Naguib, 2023. "Life-Cycle Inequality: the Black and White Differential," Diskussionsschriften dp2301, Universitaet Bern, Departement Volkswirtschaft.
    7. Brant Abbott & Giovanni Gallipoli, 2022. "Permanent‐income inequality," Quantitative Economics, Econometric Society, vol. 13(3), pages 1023-1060, July.
    8. Job Boerma & Loukas Karabarbounis, 2021. "Inferring Inequality With Home Production," Econometrica, Econometric Society, vol. 89(5), pages 2517-2556, September.
    9. Zhao, Da & Wu, Tianhao & He, Qiwei, 2017. "Consumption inequality and its evolution in urban China," China Economic Review, Elsevier, vol. 46(C), pages 208-228.
    10. Jin, Zhangfeng & Zhang, Junsen, 2023. "Access to local citizenship and internal migration in a developing country: Evidence from a Hukou reform in China," Journal of Comparative Economics, Elsevier, vol. 51(1), pages 181-215.
    11. Neil Amin‐Smith & Orazio P. Attanasio, 2020. "Consumption and Wage Inequality in the US: The Dynamics of the Last Three Decades," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 7-38, March.
    12. Jonathan Heathcote & Fabrizio Perri & Giovanni Violante & Lichen Zhang, 2023. "More Unequal We Stand? Inequality Dynamics in the United States, 1967–2021," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 50, pages 235-266, October.
    13. Greg Kaplan & Giovanni L. Violante, 2010. "How Much Consumption Insurance beyond Self-Insurance?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 53-87, October.
    14. Hasan, Syed & Ratna, Nazmun & Shakur, Shamim, 2019. "Exchange rate, remittances and expenditure of foreign-born households: evidence from Australia," GLO Discussion Paper Series 331, Global Labor Organization (GLO).
    15. Tan, Jing & Xu, Hao & Yu, Jingwen, 2022. "The effect of homeownership on migrant household savings: Evidence from the removal of home purchase restrictions in China," Economic Modelling, Elsevier, vol. 106(C).
    16. Etheridge, Ben, 2015. "A test of the household income process using consumption and wealth data," European Economic Review, Elsevier, vol. 78(C), pages 129-157.
    17. Mark Setterfield, 2020. "Managing the discontent of the losers," Review of Social Economy, Taylor & Francis Journals, vol. 78(1), pages 77-97, January.
    18. Yavuz Arslan & Bulent Guler & Temel Taskin, 2021. "Price Search, Consumption Inequality And Expenditure Inequality Over The Life ‐Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 295-320, February.
    19. Xinhua Gu & ChunKwok Lei & Li Sheng & Qingbin Zhao, 2021. "Global current account imbalances and the link between income and consumption inequality," Review of International Economics, Wiley Blackwell, vol. 29(3), pages 557-572, August.
    20. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante & Lichen Zhang, 2023. "More Unequal We Stand? Inequality Dynamics in the United States 1967–2021," NBER Working Papers 31486, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rdevec:v:25:y:2021:i:4:p:2298-2322. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.