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A Simple Model of the Chinese Hukou System and Some Ongoing Reforms

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  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

We model the Chinese Hukou (household registration) system, from the Mao era when it was strictly enforced to the early reform era (Deng Xiaoping era) when peasants were allowed to migrate to cities for work only. We document some stylized characteristics of Hukou control, and based on which build a rigorous model of the dual labor market generated by it. The model can explain the urban-rural divide, especially in the early transition period, and the fact that rural migrant workers not only made important contributions to China's export boom, but also reversed the Chinese trade pattern—from exporting primary products to manufactured goods, because they are the labor force in "the manufacturing hub of the world". Reform recovers some of the deadweight losses from Mao's strict Hukou control, but the gains from reform are unevenly distributed. We also apply the model to examine the impacts of various policies and some ongoing reforms such as special economic zones, export-tax refund, urbanization, privatization, one-child policy, etc.

Suggested Citation

  • Laixun Zhao, 2016. "A Simple Model of the Chinese Hukou System and Some Ongoing Reforms," Discussion Paper Series DP2016-03, Research Institute for Economics & Business Administration, Kobe University, revised Jan 2017.
    • Handle: RePEc:kob:dpaper:dp2016-03
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2016-03.pdf
    File Function: Revised version, 2016
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    References listed on IDEAS

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    Cited by:

    1. Guangliang Yang & Lixing Li & Shihe Fu, 2020. "Do rural migrants benefit from labor market agglomeration economies? Evidence from Chinese cities," Growth and Change, Wiley Blackwell, vol. 51(3), pages 910-931, September.

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    More about this item

    Keywords

    Chinese institutions; Discrimination; Hukou; Rural-Urban migration; Earnings inequality; Trade policy; Special economic zones; Urbanization;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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