Migration history, hukou status, and urban household consumption

Under China’s household registration system, aka the hukou system, people have urban or rural hukou. Urban hukou generally provides more public service and welfare than rural hukou, and there is a barrier for getting an urban hukou unless one is endowed with urban hukou by birth. From 2014, China speeds up the hukou system reform. Rural-to-urban migrants can change their hukou status to urban through various channels and become the Nong-Zhuan-Fei. Meanwhile, public service covers a broader population than before. Existing literature attributes the suppressed consumption level of migrants to the constraints of the hukou system. However, noninstitutional factors are also crucial in explaining this phenomenon, considering the new laws and regulations of hukou system reform. We use Nong-Zhuan-Fei as a unique benchmark to identify the institutional and noninstitutional effects on household consumption. Urban hukou and its associated institutional restriction make Nong-Zhuan-Fei households consume (per capita) 2.4% more than “comparable” rural homes. The country life experience and consumption habits make both Nong-Zhuan-Fei and rural hukou city residents taking more conspicuous consumptions than native urban households. There is no significant difference in overall expenditures between Nong-Zhuan-Fei and native urban homes, but Nong-Zhuan-Fei households put more weights on conspicuous consumptions than pragmatic consumptions.