The impacts of income gaps on migration decisions in China NONG ZHU CHINA ECONOMIC REVIEW Gabrielle BODEL Foudil LEKHAL
INTRODUCTION Goals of the paper:
Plan: oBackgrounds
- Effects of income gaps on migration decisions in China
oModel oResults
oConclusion - Where are those gaps from?
BACKGROUND ● Harris-Todaro (1970) : wage gap => rural/urban migration ● Famine between 1959-1961 =>rural/urban migration limited ● Two method : high opportunity cost and civil registry system
● Dualism of Chinese society and a significant income gap ● The household responsibility system : Buy food in urban areas without urban registration status / Increased personal freedom to rural people ●
The government continues to limit migration : High level of urban life/Investments in urban infrastructure/The business reform state-owned
●
Urban informal sector and rural non-farm sector
METHOD Three factors:
- differences education and age of migrants - differences in productivity between the two sectors - unobserved characteristics ◦ Selectivity Bias ◦ Switching regression and structural Probit :
Reimers (1983) : correct selection bias Agesa & Agesa (1999) : adopted this method (Kenya) We estimate the urban and rural income :
Income gap :
We can decompose this equation into three parts : - Differences in average characteristics - Differences in the parameters of the wage function - Differences in selectivity bias
-Migrants may enter only in the urban informal sector -Surplus workers -Gap between prices of industrial/agricultural products
I=D
Ratio of urban income on rural income R
Corrected for selection bias R'
where
MIGRANTS China National Social Science Fund 1993 in Hubei province 2 573 households 2 types of questionnaire: household and individual
Migration is « a change of usual residency between towns, townships, or streets »
Two categories of migrants: permanent & temporary (= residence place ≠ hukou place) Hukou place = registration system for residents Permanent migrants are more qualified, better integrated in employment programs than temporary one and have a social protection
EMPIRICAL RESULTS The sex is selective for migration => 2 equations for each sex: income and selection
Migrants’ characteristics compared to nonmigrants: - younger - better educated
Men’s characteristics compared to women:
- better educated - higher income
- higher incomes
- less married
Age is significant for men Experience increase in income
Education is significant for men and non-migrant women
GDP of destination place is not significant for migrant women
Results for the impact of income gap on the migration decision Income gap is measured with the two previous income equations Relation age/migration: increases and then decreases => treshold For men positive role of education Marriage negative role Larger is the gap, stronger is the migration propensity
When the income gap changes
Perloff (1991): two methods to measure it
2 simulations:
- average
- 10% increase in the rural income
- share
- 10% decrease in the urban income
Different conclusions about the migration probability for men and women when the income gap changes
Urban income > rural income
So urban variation is more important in monetary value
Initial ratio urban/rural = 1.99 1st simulation: for men’s ratio ↘ 21.5% for women’s ration ↘ 16,1%
2nd simulation: men’s ratio ↘ 30.1% women’s ratio ↘ 41.6%
More or less the same change in migration probability for men and women
Conclusion oLarger is the income gap and stronger is the migration propensity oThe income gaps are mainly from different education levels, age
oWhat would be the migration decisions with public investments in rural sector?
oThe data only take in account the migration inside Hubei province
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