Working Paper

Trade Openness and the Wage Premium: Evidence from China (with Giorgio Fazio and John Sessions) [PDF]

Abstract: How does trade openness affect industry wage premium and whether the effects of trade openness vary across tradable and non-tradable sectors? To answer this question, we explore the relationship between trade openness and inter-industry wage differential in China. This paper first estimates industry-level wage premia which measures the part of wage variation that cannot be explained by work and firm characteristics. By empirically assessing the relationship between wage premia and trade openness, this paper finds that trade openness has a positive effect on wage premia. Also, disaggregating sectors into tradable and non-tradable sectors shows that the positive effect of openness on the wages of the tradable sectors feeds into the wages of the non-tradable sectors. In addition, imperfect mobility of labour across regions is considered when the transmission from tradable sectors to non-tradable sectors is examined. Taking into consideration the imperfect mobility of labour across regions, the results suggest the impact of tradable sectors on non-tradable sectors is most pronounced in high restrictive regions. Finally, the estimates provide evidence on the role of consumer preference, which can be another important channel to explain the impact of tradables on non-tradables. 

Internal Migration and Urban Wage: Evidence from Hukou Reform in China [PDF]

Abstract: This paper aims to investigate whether internal migration affects urban natives’ wages and whether this relationship is influenced by hukou policies and hukou reforms. I investigate the impact of an increase in migration from rural to urban areas on native workers’ wages in Chinese cities. Specifically, I exploit cross-city variations in local labour market conditions that arise from non-uniform Hukou reform implementations. The identification strategy exploits variations in the relaxation of the internal migration restrictions across cities, and variations in the pre-reform migration flows across cities between 2000 and 2005. I find that, on average, an increase in rural-urban migration increases the wages of urban workers, with the effect being higher for high-skilled urban workers. Using a shift-share instrument to further examine the effect of rural-urban migrants on native workers’ wages leads to similar evidence.

How Does the Hukou System Affect Internal Migration in China? [PDF]

Abstract: This paper investigates whether the hukou system is a barrier to internal migration and whether it enhances the responsiveness to economic factors (such as wages and employment probabilities). By employing a gravity equation modelling approach of migration stocks and a Bartik-type instrument, I find that migration decisions are associated with economic factors such as wage and unemployment characteristics, with stronger effects in destinations where hukou restrictions are stronger. Also, migration restrictions can influence the relevance of other determinants of migration, such as public and amenity services in destinations. The results demonstrate that, all else equal, migrants tend to favour destinations with higher wage differentials and favourable probabilities of finding employment. Increased migration restrictions increase migration costs and enhance the importance of economic factors such as wage differentials and employment probabilities. These findings suggest that internal migration is sensitive to Hukou policies, and migration restrictions are an important factor in understanding internal migration patterns in China. This paper is also the first to quantitatively estimate the effect of migration regulations on migration flows in the Chinese context using specific measures of hukou stringency. 

Son Preference and the Crops: Theory and Evidence from China (With Wenhao Cheng and Jiacheng Xiao) [PDF]

Abstract: We develop a tractable model to characterize the effects of the productivity of rice and wheat on son preference. The model suggests that since growing rice requires a higher level of collaboration in which men play a relatively more active role, households living in areas favourable to rice production will have stronger son preference. Using geographic information system data and population census data. We show that the empirical estimates are consistent with the prediction of our model. We further find that individuals from provinces with large gaps between rice and wheat suitability have less equal gender norms.

Work In Progress

Internal Migration and Skill Mismatch in China

Abstract: This paper investigates whether institutional impediments of migration play a role in overeducation and skill mismatch. I employ two approaches to measure overeducation and undereducation: the subjective method and the empirical method, and then relate the measurements with worker’s migration status. The results suggest that migration impediments result in overeducation and skill mismatch.