Relaxing Migration Constraints for Rural Households

Cynthia Kinnan, Shing-Yi Wang, Yongxiang Wang

NBER Working Paper No. 21314
Issued in July 2015
NBER Program(s):   DEV

There are an estimated 750 million internal migrants in the world, yet the effects of access to internal migration for rural households are not well understood. Internal migrants may provide wealth transfers, insurance or credit to households remaining in rural areas. This paper exploits two unique features of China's history to study the impact of relaxing migration constraints on the outcomes and choices of agricultural households: reforms to the household registration (hukou) system that relaxed restrictions on migration, and historical, centrally-planned migration flows. We show that historical flows of temporary migration due to a government policy called the "sent-down youth" (SDY) program created lasting inter-province links, so that decades later, reforms to the hukou system in cities which sent SDY increased migration in provinces where those SDY were sent. Using this variation, we find that improved access to migration leads to higher levels of consumption and lower consumption volatility for rural households. Furthermore, household production decisions change, with a shift into high-risk, high-return activities including animal husbandry and fruit farming.

http://www.nber.org/papers/w21314