Why Do Migrant Households Consume So Little?

Exploring data from the urban and migrant household surveys of the Chinese Household Income Project (CHIP), we dissect the underlying causes of the depressing effect of the hukou system on migrant household consumption into two channels. On the one hand, the disentitlement to local urban hukou promo...

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Bibliographic Details
Published in:Policy File 2017
Main Author: Chen, Xiaofen
Format: Report
Language:English
Subjects:
Asian Development Bank Institute
Consumers
Developing countries
Economic policy
Immigration
LDCs
Online Access:Request full text
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Summary:Exploring data from the urban and migrant household surveys of the Chinese Household Income Project (CHIP), we dissect the underlying causes of the depressing effect of the hukou system on migrant household consumption into two channels. On the one hand, the disentitlement to local urban hukou promotes temporary migration and incentivizes migrant households to save their transitory income. On the other hand, it creates financial insecurity through barriers to employment, social welfare, and medical insurance, etc., thereby encouraging precautionary saving. Factors reflecting these considerations, such as medical and pension insurance, the duration of migration, and local homeownership, are specifically modeled, and are found to contribute to the discrepancies in consumption between migrant and local urban households, among other factors. In addition, the marginal propensity to consume exhibits heterogeneity across households; it is higher with a longer duration of migration, local homeownership, and self-employment. The lack of these attributes further reinforces the reluctance of migrant households to consume.