Migration Decision and Rural Income Inequality in Northwestern China

Using rural household survey data from northwestern China, this study examines the decision between internal migration and home production for rural households and its impact on rural income distribution. By constructing counterfactual scenarios under which households are allowed to switch freely between internal migration and home production, this study finds that the migrant households in the studied region could have earned more had they choose not to migrate and work in local sectors, given the results that show remittances earned by the migrant households are less than their simulated home production earnings. The findings also illustrate that there would also be less income inequality in this area if migrants choose to work locally. These results are compatible with the fact that the internal migration in the study area is very likely to be involuntary, primarily due to the lack of arable land and insufficient local nonfarm job opportunities, usually provided by township and village enterprise