Jun Han

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Is Immigration Beneficial to Urban Residents?
The Effect of Labor Migration on the Wage
Structure in China

• Jun Han
• Nankai University
• Shi Li
• Beijing Normal University

2
Main Questions

• What is the role of migration in certain labor
  market behaviors such as inequality?
• How does migration affect inequality?
• What are the effects of migrants on urban
  residents?

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Contributions of This Study

• New evidence on the relationship between massive
  internal migration and wage structure of China.
• Analysis on social effect of migration, which has
  been rarely analyzed in the literature.
• The first study that analyzes the effect of
  migration on the wage structure of immigration
  region, emigration region, and the overall
  regions.

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Structure

• Data description and introduction of migration
  and migrants in China.
• The own effect the impact of migration on
  migrant wage.
• The social effect the effect of migration on the
  wages of urban residents.
• The effects of migration on education premium,
  inequality and residual inequality within city.
• The counterfactual results of inequality after
  removing own effect and social effect in the
  overall country.

5
Literature

• The discrimination and convergence in wages and
  difference in cohort quality (Borjas 1985, 1995,
  1996 and 2003)
• The impact of immigration on labor market
  outcomes such as wages, native employment, and
  inequality (Card 2001, 2005, and 2009 Smith
  2006)

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Literature

• The wage structure (Katz and Murphy 1992 Murphy
  and Welch 1992 Juhn, Murphy and Pierce 1993
  Lemieux 2006)
• Wage structure in China ( Zhang, Zhao, Park and
  Song 2005 Han 2006 Zhang, Han, Liu and Zhao
  2008 Han, Liu and Zhang 2011).
• The effect of labor supply of some groups on
  others' wages or the wage structure (Juhn and Kim
  1999 Acemoglu, Autor and Lyle 2004 Hsieh and
  Woo 2005)

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Migration and Migrants in China

• We use the data from Chinas 2005 minicensus,
  which surveyed 1 percent of the Chinese
  population using a multistage sampling design.
• The 2005 minicensus is unique with specific
  information on wages and work-related variables.
• The 2005 income data is valuable as it consists
  of the incomes of migrants, who are severely
  undersampled in the annual urban household survey
  conducted by the National Bureau of Statistics
  (NBS).

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Wage and Fraction of Migrants
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Wages at All Percentiles
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Data Characteristics
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Job Distribution of Migrants in Different
Industries and Occupations
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Job Distribution of Urban Residents in Different
Industries and Occupations
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The Effect of Migration on Wage

• The empirical model is set as follows
• Because we analyze the returns to migration, the
  sample only consists of migrants and rural
  residents.
• As there exists a problem of potential
  endogeneity, we use instrument variable (IV)
  social network of an individual.

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• OLS results would bias the estimation results
  downward.
• Women's migration premium is higher than men's.

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The Social Effect of Migration

• When migrants enter cities, they may crowd out
  job opportunities of local urban residents, which
  can be defined as substitution effect.
• However, there might be social effects of
  migration complementary effect of migration on
  natives.
• The empirical model is set as follows
• We use two sets of IVs here number of origins of
  migrants in this city as IV1, and origins of
  migrants from first-tier, second-tier,
  third-tier, and fourth-tier cities as IV2.

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Individual Level
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City Level
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• The significant and positive coefficients
  indicate that migrants have complementary impact
  on natives rather than substitution effect.
• OLS results tend to underestimate the social
  effect of migration.
• The elasticity (coefficient) means that native
  wage increases 2.2 when the fraction of migrants
  in this city increases 10.
• Migration has different effects on different
  education groups of natives higher-education
  natives benefit more from migration as the
  complementary effect is higher.

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The Effect of Migration on City Wage Inequality

• We will analyze
• How migration affects the education premium of
  natives.
• How migration affects the inequality within the
  city.
• How this impact of migration on inequality is
  caused by the residual inequality.

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Fraction of Migrants and College Premium
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Fraction of Migrants and High-School Premium
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Migration and Education Premium
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Migration and City Inequality Urban Residents
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Migration and City Inequality Urban Residents
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Migration and City Inequality Rural Residents
and Migrants
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Migration and City Inequality All Residents
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Migration and Residual Inequality

• We have found that migration can increase the
  college premium and lower-tail wage inequality of
  urban residents, while the effect is smaller on
  high-school premium and higher-tail wage
  inequality.
• There must be some other factors, such as
  within-group inequality (or residual inequality),
  which will be discussed in this subsection.
• Most of studies have focused on the between-group
  inequality while few have touched upon the
  within-group inequality. Our study provides a new
  evidence on the effect of migration on
  within-group inequality in China.

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The Effect of Migration on Residual Wage of City
Residents
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The Effect of Migration on Residual Wage of All
Residents
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The Role of Migration in the Wage Inequality of
China

• We have analyzed that own effect and social
  effect can affect the wage structure and city
  inequality.
• We conduct a counterfactual analysis of how the
  own effect and social effect affect the
  inequality of the whole country.
• Because the individual situation is more
  complicated and we only classify not so
  specifically, our analysis only provides a lower
  bound of the counterfactual inequality excluding
  migration.
• Because own effect and social effect mainly
  differentiate between group inequality rather
  than within-group inequality, we cannot take into
  account the residual inequality here.

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Counterfactual Analysis
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Counterfactual Analysis of the Urban Residents
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Counterfactual Analysis of the Rural Residents
and Migrants
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• Own effect has little effect on the inequality of
  the whole society, only reducing lower tail while
  raising upper tail to a little extent.
• However, social effect can enlarge the wage
  inequality to some extent. Social effect
  contributes around 4.8 to the overall wage
  inequality.
• For rural residents, the counterfactual wages at
  different percentile are similar as the original
  wages, which reveals there is almost no effect.

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Concluding Remarks

• China provides a unique experience of massive
  internal migration with the segregation of jobs
  between migrants and natives.
• Under this circumstance, there exists
  complementary effect of migration on native
  wages, rather than the imperfect substitution
  effect that has been found in the literature.
• We find that the elasticity of complementation of
  migrants is about 0.27, 0.185 and 0.122 for
  native college-, high-school-, and
  dropout-educated workers.

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• Migrants can benefit from migration, which
  results in the wage rise at about 13.9.
• Although this is a great improvement, the own
  effect'' cannot affect the overall inequality of
  the society a great deal.
• The social effect'', which is the complementary
  effect, affects the overall inequality to a large
  extent. Almost 4.8 of the overall inequality can
  be explained by this social effect''.

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• If we only consider the urban residents,
  migration has also increases the college premium
  greatly while it does little to high-school
  premium.
• Migration increases the wage inequality of urban
  residents, with the effect on lower-tail
  inequality higher than that on upper-tail
  inequality.

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Policy Implication

• Migrants have made great contributions to cities
  (in particular the promotion in productivity of
  natives) and cities should be more concerned
  about the welfare of migrants.
• There are still many more barriers in welfare in
  addition to hukou, such as the low social
  security and medical care, high burden and
  frequent overtime shift, low or no salary for
  overtime work, discrimination for children
  education, and etc.

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• Low welfare and wages might keep migrant away
  from cities.
• There has been an inverse flow of migrants
  recently, due to the industry upgrading and rise
  in the labor costs.
• How this inverse flow affects the wage structure
  and other labor market behaviors will arouse more
  interests and further related study.

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• Thank you!