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Inequality and Internal Migration in China: Evidence from Village Panel Data

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Author Info

  • Wei Ha

    ()
    (Policy Specialist at the Human Development Report Office, UNDP)

  • Junjian Yi

    ()
    (Economics Department of the Chinese University of Hong Kong)

  • Junsen Zhang

    ()
    (Economics Department of the Chinese University of Hong Kong)

Abstract

This paper analyzes the impact of rural-to-urban migration on income inequality and gender wage gap in source regions using a newly constructed panel dataset for around 100 villages over a ten-year period from 1997 to 2006 in China. Since income inequality is time-persisting, we use a system GMM framework to control for the lagged income inequality, in which contemporary emigration is also validly instrumented. We found a Kuznets (inverse U-shaped) pattern between migration and income inequality in the sending communities. Specifically, contemporary emigration increases income inequality, while lagged emigration has strong income inequalityreducing effect in the sending villages. A 50-percent increase in the lagged emigration rate translates into one-sixth to one-seventh standard deviation reduction in inequality. These effects are robust to the different specifications and different measures of inequality. More interestingly, the estimated relationship between emigration and the gender wage gap also has an inverse Ushaped pattern. Emigration tends to increase the gender wage gap initially, and then tends to decrease it in the sending villages.

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Bibliographic Info

Paper provided by Human Development Report Office (HDRO), United Nations Development Programme (UNDP) in its series Human Development Research Papers (2009 to present) with number HDRP-2009-27.

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Length: 42 pages
Date of creation: Jul 2009
Date of revision: Jul 2009
Publication status: Published as background research for the 2009 Human Development Report.
Handle: RePEc:hdr:papers:hdrp-2009-27

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Keywords: Internal Migration; Inequality; System GMM;

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References

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  1. Dwayne Benjamin & Loren Brandt & John Giles, 2004. "The Evolution of Income Inequality in Rural China," William Davidson Institute Working Papers Series 2004-654, William Davidson Institute at the University of Michigan.
  2. David Card, 2009. "Immigration and Inequality," NBER Working Papers 14683, National Bureau of Economic Research, Inc.
  3. Meng, Xin & Zhang, Junsen, 2001. "The Two-Tier Labor Market in Urban China: Occupational Segregation and Wage Differentials between Urban Residents and Rural Migrants in Shanghai," Journal of Comparative Economics, Elsevier, vol. 29(3), pages 485-504, September.
  4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  5. Shahid Yusuf & Tony Saich, 2008. "China Urbanizes : Consequences, Strategies, and Policies," World Bank Publications, The World Bank, number 6337, October.
  6. Stark, Oded & Taylor, J. Edward & Yitzhaki, Shlomo, 1988. "Migration, remittances and inequality : A sensitivity analysis using the extended Gini index," Journal of Development Economics, Elsevier, vol. 28(3), pages 309-322, May.
  7. Stark, Oded & Bloom, David E, 1985. "The New Economics of Labor Migration," American Economic Review, American Economic Association, vol. 75(2), pages 173-78, May.
  8. de Brauw, Alan & Giles, John T., 2012. "Migrant Labor Markets and the Welfare of Rural Households in the Developing World: Evidence from China," IZA Discussion Papers 6765, Institute for the Study of Labor (IZA).
  9. Mckenzie, David & Rapoport, Hillel, 2007. "Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico," Journal of Development Economics, Elsevier, vol. 84(1), pages 1-24, September.
  10. Du, Yang & Park, Albert & Wang, Sangui, 2005. "Migration and rural poverty in China," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 688-709, December.
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Cited by:
  1. Wilson, E. J. & Jayanthakumaran, K. & Verma, R., 2012. "Demographics, Labor Mobility, and Productivity," ADBI Working Papers 387, Asian Development Bank Institute.
  2. Ranathunga, Seetha P.B., 2011. "Impact of rural to urban labour migration and the remittances on sending household welfare: a Sri Lankan case study," MPRA Paper 35943, University Library of Munich, Germany, revised 14 Dec 2011.

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