Relaxing Migration Restrictions and Labor Reallocation

This paper evaluates how the weakening of restrictive government labor institutions influences labor reallocation by utilizing an unique institution change, which commonly referred as the 'Hukou reform' in China on internal migration and employment. We create a reform exposure variable by combining a 'link factor', which is the past migration patterns, and a 'pull factor', which is the Hukou reform in potential migration destinations, to capture the effects of Hukou reform across all provinces on an individual's labor decisions. We also classify the reform into different categories based on their relevance to rural residents' labor decisions. Our findings reveal that lower barriers to migration resulting from the Hukou reform significantly impact migration and job occupation. Notably, only the most relevant category of reform has significant effects.