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

  • 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)

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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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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  1. Dwayne Benjamin & Loren Brandt & John Giles, 2003. "The Evolution of Income Inequality in Rural China," Working Papers benjamin-04-01, University of Toronto, Department of Economics.
  2. 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.
  3. David Card, 2009. "Immigration and Inequality," American Economic Review, American Economic Association, vol. 99(2), pages 1-21, May.
  4. 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.
  5. de Brauw, Alan & Giles, John, 2008. "Migrant Labor Markets and the Welfare of Rural Households in the Developing World: Evidence from China," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6085, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  7. 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.
  8. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Bar-Ilan University, Department of Economics.
  9. Shahid Yusuf & Tony Saich, 2008. "China Urbanizes : Consequences, Strategies, and Policies," World Bank Publications, The World Bank, number 6337.
  10. 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.
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