Does uncertainty affect graduates’ decision to relocate for work? Evidence at China’s city level

The rising global uncertainty has been proved to have great impact on labor market. Compared to the adults defined as those aged 25 years and above, the youth aged between 15 and 24 years has experienced sharper employment losses. In this study, we examine the effect of economic policy uncertainty (EPU) on the choice of employment city by youth labor using the employment data of 46,804 graduates in China from 2014 to 2019. We find that: (1) EPU can significantly reduce the likelihood of youth leaving their hometown for employment. In other words, uncertainty makes graduates more “conservative” in their choice of cities; (2) City characteristics are important factors influencing graduates’ choice of city, with economic factors being among the most important ones; (3) The probability of male and graduates with doctoral degree leaving their hometown for employment is relatively less affected by the negative effect of uncertainty, while female and graduates with master degree are more affected. Our findings can generate important implication for youth-oriented labor market policies.