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Targeted Cash Transfers, Credit Constraints, and Ethnic Migration in the People’s Republic of China

Author

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  • Anthony Howell

    (Peking University)

Abstract

This paper relies on recent proprietary data from the People’s Republic of China’s (PRC) poor rural minority areas to examine the importance of credit constraints on internal labor migration. Specifically, a liquidity shock via the PRC’s minimum living standard assistance (MLSA) program is decomposed into its direct and indirect parts. The institutional features of the MLSA program permit an identification strategy that relies on a set of verifiable assumptions and an instrument variable framework. The results reveal that the direct effect on migration of MLSA is negative, although the net effect is positive driven by the large indirect effects, which are twice as large for ethnic minorities compared to the Han majority. Subsequent evidence further suggests that the main mechanism behind the indirect effect is informal interpersonal lending fostered by risk-sharing strategies. The findings imply that once liquidity is injected into a village it gets circulated in the community, stimulating migration particularly within credit-constrained minority communities.

Suggested Citation

  • Anthony Howell, 2019. "Targeted Cash Transfers, Credit Constraints, and Ethnic Migration in the People’s Republic of China," ADB Economics Working Paper Series 575, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0575
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    References listed on IDEAS

    as
    1. Howell, Anthony, 2017. "Impacts of Migration and Remittances on Ethnic Income Inequality in Rural China," World Development, Elsevier, vol. 94(C), pages 200-211.
    2. Li,Shi & Sato,Hiroshi & Sicular,Terry (ed.), 2013. "Rising Inequality in China," Cambridge Books, Cambridge University Press, number 9781107002913, September.
    3. World Bank, 2011. "Reducing Inequality for Shared Growth in China : Strategy and Policy Options for Guangdong Province," World Bank Publications - Books, The World Bank Group, number 2251, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Anthony Howell, 2019. "Ethnic entrepreneurship, initial financing, and business performance in China," Small Business Economics, Springer, vol. 52(3), pages 697-712, March.

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    More about this item

    Keywords

    ethnicity; indirect effect; liquidity constraints; migration; risk-sharing mechanisms; targeted cash;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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