Minimum Wage Disparities and Internal Migration: Evidence From China

Qianqian Yang and Nobuaki Hamaguchi
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Qianqian Yang: Graduate School of Economics, Kobe University, JAPAN
Nobuaki Hamaguchi: Research Institute for Economics and Business Administration, Kobe University, JAPAN

No DP2025-11, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper examines whether, and to what extent, inter-provincial migration in China responds to real minimum wage disparities. To conceptualize this relationship, we extend the Harris-Todaro framework by incorporating minimum wages in both rural and urban areas. For the empirical analysis, we utilize an origin-destination matrix constructed from Hukou-linked migration data (2000-2020) and match it with interprovincial minimum wage differentials. To address endogeneity concerns, we estimate a gravity-type model with fixed effects and apply an instrumental variable strategy. The baseline results indicate that a 1% increase in real minimum wage disparity leads to a 1.05% increase in inter-provincial migration. IV estimates suggest that simple OLS correlations may understate this positive effect. We also find significant heterogeneity: migrants from less developed provinces are more responsive to wage differentials, particularly when moving toward more urbanized regions. These findings highlight the role of minimum wage policy in shaping internal labor mobility within a developing and regionally diverse economy.

Keywords: Minimum wage; Internal migration; China; Regional wage disparities; Instrumental variable strategy (search for similar items in EconPapers)
JEL-codes: J38 J61 R23 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2025-05
New Economics Papers: this item is included in nep-lab and nep-mig
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