Migration, Self-selection, and Income Distributions: Evidence from Rural and Urban China

As massive rural residents leave their home countryside for better employment, migration has profound effects on income distributions such as rural-urban income gap and inequalities within rural or urban areas. The nature of the effects depend crucially on who are migrating and their migrating patterns. In this paper, we emphasize two facts. First, rural residents are not homogeneous, they self-select to migrate or not. Second, there are significant differences between migrants who successfully transformed their hukou status (permanent migrants) and those did not (temporary migrants). Using three coordinated CHIP data sets in 2002, we find that permanent migrants are positively selected from rural population especially in terms of education. As permanent migration takes more mass from the upper half of rural income density, both rural income level and inequalities decrease, the urban-rural income ratio increases at the same time. On the contrary, the selection effect of temporary migrants is almost negligible. It does not have obvious effect on rural income level and inequalities