Hukou Discrimination in the Chinese Urban Labour Market

Abstract

Using the Chinese Household Income Project (CHIP) 2002 dataset, this paper examines the effects of the Chinese hukou system and of other human capital indicators on employees’ chances to work in high-income industries and on their wages. The hukou system is a household registration and management system in China that consists in dividing households into two types: rural and urban. People register in the same household type that they inherit from their parents. The results show that rural hukou causes migrants to have a lower probability to enter high-income industries. Moreover, the highly educated rural migrants are more likely to find jobs in high-income industries than lower educated migrants. Similarly, the hukou system is an important factor in the explanation of the wage gaps in the Chinese labour market, although its effect is smaller than the one of education. In addition, for higher educated people, the wage gap between rural migrants and urban citizens are larger than those among other education groups. Other personal characteristics such as gender, marital status and political status are also important in explaining hiring discrimination and earning differences.