Study On The Motivation And Obstruction Of The Reform Of China’s Household Registration System

The reform of China’s Household Registration (hukou) system has made evident breakthroughs in the new century, while stuck in the 20th. At the same time, there are still many local governments which implement the hukou reform shilly-shally or directly oppose it. In view of this phenomenon, this paper aims to answer following two questions:firstly, what are the factors that have prompted local governments to start a sincere reform of the hukou system? Secondly, why do other local governments implement the hukou reform shilly-shally and even oppose it, and how can we eliminate the obstruction?This paper’s content can be categorized in the following four aspects:Firstly, two profound changes have taken place in China’s labor market since the new century: one is the shift from unlimited supply to limited supply of the urban labor market; the other is the expansion of the new generation migrant workers who have stronger sense of equality and safeguarding rights. When labor supply becomes limited, local governments will compete for migrant workers with public service, and the marginal return to providing public services to the migrant will increase. It provides an incentive for local governments to alter the hukou system. This paper constructs a theory model containing labor competition between local governments to depict this mechanism. Along with the expansion of the new generation migrant workers, non-productive loss will dramatically rise, which means the return to providing equal public services to the migrant will rise. The theory model containing social conflicts this paper builds shows that reforming the hukou system would be the rational choice for local governments after a certain critical point.Secondly, based on the analysis of labor competition model, this paper examines the impact of the reform of hukou system on migrant population distribution using the micro data of 2000 census and 2005 national 1% population sample survey. In order to address the possible endogenous problem caused by selection bias and unobserved factors, this paper adopts the DID with propensity score matching method. Results show that the reform of hukou system substantially promotes the inflows of migrants from rural areas and other cities, thereby increasing the city’s share of migrant population in the entire country. Though labor supply increases, further study using city-level panel data (2001-2014) on job vacancies-to-seekers ratio find null effect on job vacancies-to-seekers ratio of the reform of hukou system.Thirdly, based on the analysis of social conflict model, this paper investigates the causal relationship between proportion of immigrants and crime rate with the PMG model, and examines the role of the hukou system in this relationship, using panel data from 1997 to 2013 of China’s 30 provinces. This paper finds that rising probability of obtaining a local hukou for immigrants leads to declining crime rate. Results also show that increase of the proportion of immigrants leads to a significant rise in the crime rate under current hukou system. Further research differentiating between migrants with local hukou and temporary residents reveals that migrants with local hukou are not significantly related to the crime rate while temporary residents are significantly associated with the crime rate. The expansion of immigrants would no longer increase the crime rates when the probability to obtain a local hukou for immigrants is relatively high.Last but not least, this paper calculates regional citizenization rate using the micro da(?) of 2005 national 1% population sample survey and then investigates the causal relationship between regional citizenization rate and individual labor income. Two different indicators, the proportion of non-agricultural population in the total permanent residents and the average coverage of pension, unemployment and medical insurance, are applied to measure the regional citizenization rate. The results by the two indicators are basically consistent, both demonstrting significant positive external effects, which are also verified by IV and UCI estimates. The findings indicate "beggaring thy neighbor" is not the case, on the contrary, both original citizens and non-citizens who have failed to share the pie will benefit from citizenization.Sum up, two conclusions can be drawn:Firstly, two profound changes of China’s labor market, namely the shift from unlimited supply to limited supply of the urban labor market and the expansion of the new generation migrant workers, have resulted in a non-equilibrium state of the original system since the new century. This non-equilibrium state provides potential benefit opportunity for local governments to reform the hukou system. That’s why the reform of hukou system has made great advances in the new century. Empirical studys prove that the reform of hukou system has fulfiled the expected purposes.Secondly, the bounded rationality, failing to figure out the actural effect reforming the hukou system would have, of local governments, is the reason why many local governments implement the hukou reform shilly-shally and even oppose it. Conducting scientific evaluations of the effect that reforming the hukou system would have is the best way to make up for the inadequacy of information and crack the obstruction. The empirical results this paper obtains show that reforming the hukou system not only enables the urban and rural residents to more equitable access to public services, but also is a process of Pareto improvement, which implies some local governments have made wrong expectation and decisions in the past because of bounded rationality and inadequacy of information. Therefore, governments should promote the reform of hukou system more firmly and daringly in the future.