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

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  • Liu, Xinyan
  • Xu, Yunjiao
  • Zou, Jian

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.

Suggested Citation

  • Liu, Xinyan & Xu, Yunjiao & Zou, Jian, 2024. "Migration barrier relaxation and entrepreneurship: Evidence from the hukou reform in China," Labour Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:labeco:v:90:y:2024:i:c:s0927537124001003
    DOI: 10.1016/j.labeco.2024.102605
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    More about this item

    Keywords

    Entrepreneurship; Internal migration; Hukou system;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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