Formal and Informal Debt in China: Evidence from the 2014 Hukou Reform

Lei Xu (), Massimiliano Tani (), Yu Zhu and Xin Wen ()
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Lei Xu: Loughborough University
Massimiliano Tani: UNSW Canberra
Xin Wen: UNSW Canberra

No 17990, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the impact of China’s 2014 hukou reform - a major change allowing migrants living in small and medium-sized cities of less than 5 million people to apply for urban residence - on formal and informal borrowing at a time of rapid economic transformation. We find that the hukou policy change has predominantly increased natives’ access to finance, especially through informal sources, and for investments in housing. We also find that the policy affects households differently according to education level, with more educated households borrowing more to capitalise on rising asset prices driven by the ‘additional’ urban population created by the policy.

Keywords: formal and informal debt; hukou reform; migrants (search for similar items in EconPapers)
JEL-codes: D14 G51 (search for similar items in EconPapers)
Date: 2025-07
New Economics Papers: this item is included in nep-iue and nep-mig
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