Delinking Social Identity From Rural‐Urban Stereotypes: The Labor Market Effects of Abolishing Agricultural Hukou in China

Delinking social identity from entrenched stereotypes can reshape economic behavior. This study exploits China's hukou reform, which abolished the agricultural‐nonagricultural distinction and weakened the institutional foundation of rural‐urban identity, to assess its labor market impacts. Using nationally representative survey data and a difference‐in‐differences design across 89 cities, we find that rural stayers benefited most, with annual earnings increasing by about 17 percent and greater access to nonagricultural jobs. In contrast, rural‐urban migrants experienced no income gains and declining nonagricultural employment, while urban incumbents faced higher risks of nonemployment. The mechanisms include lower educational barriers, employment shifts that increased instability, and expanded rural opportunities. Heterogeneity analysis shows that rural stayers benefited disproportionately, especially the highly educated and those in moderately developed regions, whereas low‐educated migrants and incumbents were most adversely affected. Overall, the findings provide causal evidence on the distributional consequences of hukou reform and the uneven effects of delinking social identity from rural‐urban stereotypes.