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Internal Migration and Income Inequality in China: Evidence from Village Panel Data

Wei Ha, Junjian Yi () and Junsen Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: Existing studies on the impact of migration on income inequality at sending communities suffer from severe methodology defects and data limitations. This paper analyzes the impact of rural-to-urban migration on inequality using a newly constructed panel dataset for around 100 villages over a ten-year period from 1997 to 2006 in China. To our best knowledge, this is the first paper that examines the dynamic aspects of migration and income inequality employing a dynamic panel data analysis. Unlike earlier studies focusing exclusively on remittances, our data include the total labor earnings of migrants in destination areas. Furthermore, we look at the gender dimension of the impact of migration on wage inequality within the sending communities. Since income inequality is time-persisting, we use a system GMM framework to control for the lagged income inequality in estimating the effect of emigration on income inequality in the sending villages. At the same time, contemporary emigration is validly instrumented in the GMM framework because of the unobserved time-varying community shock that correlates with emigration and income inequality, as well as with the potential reverse causality from income inequality to emigration. We found a Kuznets (inverse U-shaped) pattern between migration and income inequality in the sending communities. Specifically, contemporary emigration increases income inequality, while lagged emigration has strong income inequality-reducing effect in the sending villages. A 50-percent increase in the lagged emigration rate translates into one-sixth to one-seventh standard deviation reduction in inequality. Contemporary emigration has slightly smaller effects in raising the income inequality within villages. These effects are robust to the different specifications and different measures of inequality. More interestingly, the estimated relationship between emigration and the gender wage gap also has an inverse U-shaped pattern. Emigration tends to increase the gender wage gap initially, and then tends to decrease it in the sending villages.

Keywords: Internal Migration; Inequality; System GMM. (search for similar items in EconPapers)
JEL-codes: D31 O15 J61 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-lab, nep-mig and nep-tra
Date: 2009-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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