Migration and Discrimination in Urban China: A Decomposition Approach

Currently, about 150 million migrant workers reside in the major Chinese cities, where they are treated like second‐class citizens by the local city governments and denied access to government jobs and welfare entitlements, with large differences existing in their treatment across the cities. In this paper, we use a new and unique dataset of urban natives and rural to urban migrants from 15 different cities in China to document this differential treatment. We apply a relatively new non‐parametric technique, Nopo decomposition, which takes into account differences in the distribution of observable characteristics to decompose the wage gap that exists between the two groups and estimate the extent of discrimination faced by the migrants. Rural‐to‐urban migrants are found to be discriminated in the urban labour market, but to a lesser extent than has been argued in the literature. We also find that a large gap exists between the national legislation on the treatment of migrants on one hand and the implementation and enforcement by city governments on the other, and that this differential treatment helps explain part of the level of discrimination.