Existing studies on the impact of migration on income inequality at sending communities suffer from severe methodology defects and data limitations. This paper analyzes the impact of rural-to-urban migration on inequality using a newly constructed panel dataset for around 100 villages over a ten-year period from 1997 to 2006 in China. To our best knowledge, this is the first paper that examines the dynamic aspects of migration and income inequality employing a dynamic panel data analysis. Unlike earlier studies focusing exclusively on remittances, our data include the total labor earnings of migrants in destination areas. Furthermore, we look at the gender dimension of the impact of migration on wage inequality within the sending communities. Since income inequality is time-persisting, we use a system GMM framework to control for the lagged income inequality in estimating the effect of emigration on income inequality in the sending villages. At the same time, contemporary emigration is validly instrumented in the GMM framework because of the unobserved time-varying community shock that correlates with emigration and income inequality, as well as with the potential reverse causality from income inequality to emigration. 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 inequality-reducing 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. Contemporary emigration has slightly smaller effects in raising the income inequality within villages. 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 U-shaped pattern. Emigration tends to increase the gender wage gap initially, and then tends to decrease it in the sending villages.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
16896.
Find related papers by JEL classification: D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: