Hukou reform and labor market outcomes of urban natives in China

This paper investigates the causal effects of the relaxation of internal migration restrictions on labor market outcomes of urban natives in China, exploiting an “entry barrier” hukou reform. The prevalent view of China’s hukou reform emphasizes its attraction for low-skilled workers, neglecting its considerable impact on high-skilled individuals. We find that the hukou reform cities attracted more high-skilled migrants. The greater availability of high-skilled migrants due to the hukou reform did not significantly affect the overall employment and income of urban natives. However, the reform did lead to employment shifts among urban natives, and these effects were most pronounced among high-skilled and medium-skilled urban natives. In addition, we find evidence that the reform attracted more self-employed individuals and private-owned enterprises (POEs), which stimulated local labor demand, especially for high-skilled workers.