Educational divergence among urban residents and migrant workers: Evidence from China

ABSTRACT: While the Harris-Todaro model is a traditional approach used in researching the urban-rural dichotomy, it fails to explain families’ goals to maximize their current utility in terms of intertemporal decision-making conditions. To fill this gap, in this paper, an urban-rural dichotomy model involving labor migration and education is established, in which it is assumed that family utility derives from consumption and children’s educational achievement. The steady-state path derived through the Bellman equation suggests that increasing educational investment and family education intensity leads to a significant urban-rural difference in children’s educational achievement. Compared with the traditional Harris-Todaro model, the transversality condition is loosened in this model, while the unavailability of loans constrains migrant families. Four hypotheses are made and tested using an empirical study. An ordinary least squares regression was used in the analysis, but due to the endogeneity caused by missing variables, the instrumental variable method and two-stage least squares regression were used. The results demonstrate that the household registration system can explain 44.5% of the educational achievement difference, and the initial difference is inflated 4.73 times after nine years of compulsory education. This divergence could increase the differences caused by household registration status, resulting in larger income gaps and intergenerational heredity of identities