Migration barrier relaxation and entrepreneurship: Evidence from the hukou reform in China

Xinyan Liu, Yunjiao Xu and Jian Zou

Labour Economics, 2024, vol. 90, issue C

Abstract: We study the impact of relaxing internal migration barriers on entrepreneurship by exploiting China’s 2014 nationwide hukou reform and the administrative firm registry. Our difference-in-differences estimation finds that reformed counties experience sizable increases in entrepreneurial activities compared to control counties. The reform induces the creation of firms with a smaller scale and a lower likelihood of survival, indicating moderate expansions in labor demand. Migrant workers’ wages decline and entrepreneurial activities improve most in labor-intensive industries, implying that increased labor supply serves as one underlying mechanism. Our findings highlight the important role that removing domestic labor market frictions plays in promoting entrepreneurship.

Keywords: Entrepreneurship; Internal migration; Hukou system (search for similar items in EconPapers)
JEL-codes: J42 J61 L26 M13 P21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:90:y:2024:i:c:s0927537124001003

DOI: 10.1016/j.labeco.2024.102605

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