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Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication.ADB recognizes "China" as the People's Republic of China. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building, 8th Floor 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org
AbstractExploring data from the urban and migrant household surveys of the Chinese Household Income Project (CHIP), this paper dissects the underlying causes of the depressing effect of the hukou system on migrant household consumption into two channels. On 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.